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Written by: Dr. Michael R. Muller - Director, Don Kasten
©2006 Rutgers, the State University of New Jersey
Table of Contents
INTRODUCTION ..............................................................................2 PRODUCTIVITY TOOLBOX ..............................................................5 Toolbox Introduction.....................................................................6 Productivity Metrics......................................................................9 Cost of Labor..............................................................................10 Space Optimization .......................................................................11 Productivity Questions...................................................................14 CONCEPTS FOR PRODUCTIVITY ENHANCEMENT, PART I INCREASING PIECES/PERSON/HOUR .............................................19 QUICK CHANGES......................................................................20 AR No. 1 Decrease Die Change-Out & Start-Up Times...................26 AR No. 2 Use Fixtures to Reduce Lathe Set-up Times....................32 AR No. 3 Install a Rotating Nozzle Carousel to Reduce Set-Up Times.34 AR No. 4 Employ Modular Jigs to Reduce Process Set-up Times.......36 BOTTLENECK MITIGATION.........................................................39 AR No. 5 Add Machine Operators to Reduce Production Bottleneck....41 AR No. 6 Install Refrigeration System to Cool Product...................45 AR No. 7 Replace Old Lathe With New Automatic Multi-station Tool..47 DEFECT REDUCTION .................................................................49 AR No. 8 Reduce Defects By Reducing Bottle Tipping...................53 AR No. 9 Develop Standard Procedures to Improve Internal Yields ....63 PREVENTIVE PREDICTIVE MAINTENANCE ....................................67 AR No. 10 Eliminate Shutdowns of Controls Due To Overheating ......69 AR No. 11 Begin a Predictive/Preventive Maintenance Program.........73 LABOR OPTIMIZATION...............................................................79 AR No. 12 Install Automated Glassware Packing Equipment.............81 AR No. 13 Install Magazines Between Machines to Reduce Costs.......87 AR No. 14 Cross-Train Existing Personnel to Avoid Lost Time .........90 CONCEPTS FOR PRODUCTIVITY ENHANCEMENT, PART II DECREASING COST/PIECE ..............................................................93 SCHEDULING ...........................................................................94 AR No. 15 Optimize Lot Sizes to Reduce Inventory Carrying Costs.....97 AR No. 16 Add a Second Production Shift..................................99 PURCHASING...........................................................................101 AR No. 17 Schedule Wood Chip Deliveries According to Demand......103 AR No. 18 Purchase Materials from Supplier in Customized Packing...105 AR No. 19 Install Pellet Silo and Receive Bulk Delivery Discount.......107 BURDEN ANALYSIS...................................................................109 AR No. 20 Condense Operation Into One Building ........................111 AR No. 21 Demolish Building to Reduce Tax & Insurance Fees.........114 INVENTORY .............................................................................117 AR No. 22 Eliminate Old Stock and Modify Inventory Control ..........120 FLOOR LAYOUT ........................................................................127 AR No. 23 Clear and Rent an Existing Warehouse.........................129 AR No. 24 Re-arrange Equipment Layout to Reduce Labor Costs.......131 AR No. 25 Re-arrange Equipment Layout to Reduce Handling Costs...134
Background As part of the Climatewise program, Professor Muller and other technical staff of the OIPEA have been involved with adding an energy and waste component to the PICOS supplier development program run by General Motors. As part of these activities, the GM people observed an IAC style assessment in New Jersey. Professor Muller then spent a week in Charlotte observing a PICOS assessment. During this information exchange it became clear that IAC assessments could be more effective if additional efforts were put into direct productivity issues. Recognizing that we have had training courses for center directors on energy and waste, it was concluded that an additional course should be assembled on productivity.
Evaluation of the GM PICOS™ Assessment Program The PICOS program is a long running industrial assessment service provided by GM for their suppliers based carefully on the Toyota Production System. The goal of the program is to improve the productivity of suppliers and pass the savings on to GM, which has a policy of continually paying less for a product each year. They are proud that they never tolerate price increases. The workshops, as they are called, use a team of normally two Supplier Development Engineers who are in the plant for 3.5 days. These are people with a variety of backgrounds and for the most part are not engineers. They make some suggestions themselves, but rely mostly on working groups of plant personnel to come up with cost saving ideas. Implementation of good ideas is expected to be immediate. Layout changes, for example, are often accomplished while the PICOS team is still there. Until recently, staff in the PICOS program did not concern themselves with waste or energy, but focused entirely on productivity issues. We can learn a great deal from the general approaches they use, but proprietary concerns will prohibit us from adopting any of their practices directly.
Goals and Extent of the training program We hope to provide some background material. it is hoped that director's themselves will be motivated to develop their own novel tools and fixes. Additionally. by showing the large impact of some of these recommendations. 3 . but concentrate on a number of worked examples of various kinds of productivity recommendations. The goal of the training is to provide directors with several tools which they can apply directly.
PRODUCTIVITY TOOLBOX 5 .
Labor Costs Skilled union. Floor Layout c. Usually these can be thought of as the costs or values of those things which go to make up Cost/Piece or Pieces/Person/Hour. Frequently if an action does one it also does the other. Includes energy and waste. (Sales Price/Piece) minus (Cost/Piece) 4. Cost Per Piece 5. Profit - 6 . Labor Optimization e. In our presentation we further break these categories down to help you identify the major concepts which allow the creation of Assessment Recommendations. Burden/overhead e. Defect Reduction c. Cost of Inventory Carrying Cost Cost of Raw Material 3. unskilled non-union Also like to know Fringe Cost of Labor. Scheduling Whether defect reduction increases pieces/person/hour or decreases cost/piece is somewhat arbitrary. Generally the type of productivity AR which can be recommended on a one day visit can be classified as something that Increases Pieces/Person/Hour or Decreases Cost/Piece. Overhead - 6. Preventive/Predictive Maintenance Decreases Cost/Piece a. 2. The principal metrics which are needed for ARs are: 1. Quick Changes d. unskilled union Skilled non-union. Bottleneck Mitigation b. Cost of Space Warehouse Manufacturing Office (Overhead+Labor+Materials)Cost/Piece Cost of virtually everything besides direct raw material and direct labor. Inventory d. Increases Pieces/Person/Hour a. Purchasing b.Toolbox Introduction The Toolbox is intended to supply you with a method of arriving at the necessary metrics which are required to write up and present Assessment Recommendations for Productivity. We hope you will find them possible to produce during a one day audit and that the manufacturer will find them sufficiently rewarding to implement.
The order of magnitude of the numbers should be correct under this approach and should "sell" the idea. will/should motivate the company to action. This sheet has blanks for the information desired but contains (in parentheses) assumed values for many of the metrics which should be estimated for your part of the country. If the numbers were not all forthcoming before your arrival try to get company personnel to provide them during the opening interview. but we think we can present an approach which both you and the manufacturer will find acceptable. FINAL TRY 3.. It will also allow the IAC to provide Productivity ARs which are reasonable and. or productivity cost savings opportunities. Information in this section is used throughout the report when estimating material. This approach allows the manufacturer to keep the information which he deems most private from appearing. An important task early in the assessment process is the estimation of 7 . labor. sales figures.At first glance you might conclude that these are proprietary numbers which a manufacturer may be unwilling to tell anyone outside (or even inside the company). If the necessary numbers are denied to you during this opening interview then present the PRODUCTIVITY METRICS sheet which is prepared before you ever enter the plant. Again have the PRODUCTIVITY METRICS sheet with you as you ask for the information. During the initial contact and follow up before the visit get company personnel to provide the numbers needed at the same time they are supplying energy consumption numbers. number of employees. The information was provided by facility personnel or is based on regional averages. and other facts about their manufacturing organization that we have always requested before the performance of an Industrial Assessment. Get the plant personnel to commit to the reasonableness of the numbers or if they find your numbers unacceptable to give an alternative value which you can use in your productivity enhancement ARs. Use the PRODUCTIVITY METRICS sheet to make sure nothing is forgotten. We also recommend that you include these metric values and assumptions in the introductory section of your reports (similar to or along with Plant Background summary) so that all values used to make the productivity calculations are readily apparent to the manufacturer. even if not exact. SECOND TRY 2. FIRST TRY 1.
8 . so help from plant personnel will always be needed. Additional useful information for labor cost and the cost of space is given on the following pages. This is a critical step which will allow your team to focus on those areas which offer the most opportunities.the manufacturer’s relative costs of operation. Energy Direct Labor Waste Profit Materials Cost Overhead Cost per Part = Gross Sales / # of Pieces It is probably apparent that there are still some things such as Cost or Value of Inventory which can't be judged without knowing the cost per piece and how many pieces are in inventory. An example is shown in the pie chart below. Gathering the information on the PRODUCTIVITY METRICS sheet will allow this.
_____ . _____ ) Profit Margin: Cost per Piece to Produce: _____% (100%) _____% (10%) $______/piece Inventory and Floor space: Value of Floor space: Inventory Carrying Cost: Raw Material Inventory: Work-In-Progress Inventory: Finished Goods Inventory: Quantity = ______ Quantity = ______ Quantity = ______ _______/ft2/yr ($5.94/man-hour) (Items above in parentheses indicate total cost to the company.96/man-hour) ($100/engineer-hour) ($38.47/man-hour) ($25.50/hcf. _____ . including 35% fringe) Fringe Rate: ______% (35%) Raw Material Costs: Yearly Usage Material/Resource Unit Price Water Treatment Water Usage: /hcf ($2.00/ft2/yr) _____% (15%) Value = ______ Value = ______ Value = ______ 9 . 1 hcf = 100 ft 3) Production Information: Overhead: ( includes _____ .PRODUCTIVITY METRICS SHEET Labor Costs: Type of Labor Production Worker: Skilled Technician: Engineering (contracted): Engineering (in-house): Actual ________/hr ________/hr ________/hr ________/hr Assumed ($19.
15th Edition. Structural Steel Wrecking Rate w/ Overhead and Profit Hourly Daily $41.80 $218.35 $40.20 $23. Composition Sheet Metal Workers Sprinkler Installers Steamfitters or Pipe Fitters Stone Masons Structural Steel Workers Tile Layers (Floor) Tile Layer Helpers Truck Drivers.20 $357.80 $258.00 $226.80 $201.30 $27.50 $19.15 $328.10 $22.75 $28. inside ($0.85 $32.60 $184.30 $32.00 $44.00 Trade Skilled Workers Average (35 Trades) Helpers Average (5 Trades) Foreman Avg.00 $215.80 $310.60 $356.30 $19.95 $44.60 $38.80 $226.85 $44.45 $31.20 $148.00 $220. Tile and Slate Roofer Helpers. Light Truck Drivers.00 $303.00 $155. Equipment Operators.60 $212.00 $26.60 $15.60 $197..80 $313.00 $258.30 $24.10 $37.00 $404. Oilers Equipment Operators.20 $166.90 $28.. Light Equip.25 $19. Crane or Shovel Equipment Operators.20 $194.80 $320.30 $26.00 $312. Fringes Hourly Daily $24.10 $31.55 $21.40 $23.25 $36.15 $26.40 $21.Table 1: Cost of Labor 1 Basic Rate Incl.40 $211.40 $266.80 $404.60 $254.40 $197.60 $39.00 $203.05 $47.05 $24.20 $41.60 $352.60 $212. Medium Equip.80 $305.35 $27. Ordinary Painters.55 $33.40 $382.65 $40.60 $306.20 $343. outside ($2.50 $25.80 $23.40 $196.50 $23.35 $50.55 $19.00 $326.60 $25.70 $26.60 $293. Inc.00 over trade) Common Building Laborers Asbestos Workers Boilermakers Bricklayers Bricklayer Helpers Carpenters Cement Finishers Electricians Equipment Operators. Equipment Operators.20 $224.20 $40.60 $186.30 $48.55 $48. R.60 $243.20 $172.50 $37.20 $322.65 $42.65 $18.00 $154.15 $42. Heavy Welders.40 $259.65 $25.90 $40.40 $223.20 $39.60 $327.40 $300.60 $256.40 $20.80 $356.40 $19.95 $23.45 $44.10 $22.50 over trade) Foreman Avg.00 $357.80 $249.60 $355.40 $328.25 $27.20 $191.00 $192.40 $158.50 $36.00 $289. Master Mechanics Glaziers Lathers Marble Setters Millwrights Painters.40 $189.80 $177.40 $385.00 $50.20 $342.65 $19.35 $30.40 $156.80 $23.20 $152.35 $28.45 $32.75 $25.75 $39.00 $290.30 $41.00 $152. Structural Steel Paper Hangers Pile Drivers Plasterers Plaster Helpers Plumbers Rodmen (Reinforcing) Roofers.80 $122.80 $179.00 $207.80 $187.95 $23. Composition Roofers.60 $335.40 $186.40 $332.20 1Means Repair & Remodeling Cost Data.80 $297.60 $180.80 $242.50 $24.40 $388.00 $190.65 $44.S.95 $44.70 $24.95 $30.35 $23.20 $36.70 $26.75 $40.05 $37.20 $157.00 $197. 10 .85 $38.20 $326.20 $213.95 $38.60 $314.00 $19..20 $200.40 $172.40 $24.55 $41.75 $32. Means Co.
Potentially valuable floor space is used for equipment graveyards or storage of outdated products. and dilapidated buildings are left standing (resulting in higher tax and insurance costs). Some companies who own the space they occupy do not view it as having significant value. Tables 2 and 3 can be used to estimate cost benefits for space related opportunities. Four basic options can be explored in an effort to improve the return from presently unoptimized space: • Optimize existing floor layout and: lease excess space to outside interests (see AR#24) reduce leased space requirements (see AR#21) avoid new construction for future expansions • Demolish dilapidated space to reduce tax and insurance expenses (see AR#22) Examples of cost savings calculations for the above opportunities are included in this manual in the noted AR write-ups. unused buildings are allowed to deteriorate and diminish in value. A result is that the operations are expanded into all available space in an unoptimized manner.). 11 . other possible savings opportunities which should be considered include: reduced or avoided operating costs for the space (lighting. In addition to the quantities listed in the tables.Space Optimization The value of space is an important resource that is sometimes overlooked in manufacturing facilities visited by the IACs. and reduced transportation costs (if traveling between two sites can be eliminated by consolidating operations). etc. HVAC.
000 sf 20.00 $2.00-4.00 $5.25 $3.000-60.00-28.50-3.00-3.00 $2.75-6.60 $3.75-4.50 $2.00 $20.00 $35.15-3.00 $36.00 $23.00 $25.75-4.50-3.40 $4.90-3.000-60.50-4.16-5.25 $2.50 $3.00 $25.00-70.52-7.00 $35.60-3.00 n/a n/a n/a $30.00-4.90 $3.000 sf and up 0 to 20.50 Moderate shortage Moderate shortage Moderate shortage Moderate shortage Balanced market Substantial shortage Moderate shortage Moderate shortage Substantial shortage Moderate shortage Moderate shortage Substantial shortage Substantial shortage Moderate shortage Moderate shortage Moderate shortage Moderate shortage Moderate shortage Moderate shortage Balanced market Moderate oversupply Substantial shortage Substantial shortage Substantial shortage Moderate shortage Moderate shortage Balanced market Balanced market Moderate shortage Moderate shortage Location Atlanta Size 0 to 20.000 sf 60.25 $4.00 $3.50 $2.000 sf 60.50 $2.75-4.00-35.00-9.75-4.00 $21.50 $3.00-35.00 $25.75-4.00 $25.00-45.25-5.25-5.000 sf 20.25 $2.00-53.40 $4.00 $20.00-60.50-4.00-32.25-3.80-3.000 sf and up 0 to 20.00 $30.75 $4.95-4.000-60.00 $58.75-4.50 $2.00 $25.000 sf 60.000 sf and up Boston Chicago Dallas Denver Los Angeles New York Orlando Phoenix Washington D.000 sf 20.00 $21.00-50.00-40.25 $23.000 sf 20.50 $3.00 $30.00-45.60-3.00 n/a n/a n/a $30.00-4.50-4.00-24.000 sf 60.60 $3.25 $12.25-2.20-4.50 $3.00-35.00 $3.00-60.000-60.00-40.50-17.00-35.75-6.000-60.15-3.000 sf 20.00 $26.00-5.000 sf and up 0 to 20.00-35.00-30.00 $17.000-60.60 $3.50-3.00 $2.00 $5.00 $3.00-27.00-26.00 $17.00 $33.000 sf 60.00 $25.00 $2.00-22.000 sf 20.00 $25.00-48.00-21.00 $3.00-60.000-60.30-4.50 $2.50 $3.00-24. 21996 Comparative Statistics of Industrial and Office Real Estate Markets.00 $4.00 $2.00-40.00 $48.00 $42.C.000 sf 20.00-37. phone(202) 737-1150 12 .000 sf and up 0 to 20.00 $30.00-28.25-3.000-60.00 $2.00-2.000 sf 60.80 $4.90-3.25-4.00 $30.50-3.50 $27..00 $57.00 $20.60 n/a n/a n/a $3.000 sf and up 0 to 20.00 $3.75 $3.50 $2.00 $37.00 $32.00-6.50 n/a n/a n/a $3.00 $45.000 sf 60.25-3.25-3.000 sf and up 0 to 20.75 $3.00-6.50-26.00 $39.000 sf 20.00-45.50-4.000 sf and up 0 to 20.25 $3.50-6.00-50.00 $23.25-5.00-7.00 $3.90-3.00 $3.000-60.75 $4.00 $20.Table 2: Value of Space 2 Sale Prices ($/ft 2 ) Lease Prices ($/ft 2 /yr) Central Central Vacancy City Suburban City Suburban Indicators $22.00-21.00 $35. Society of Industrial and Office REALTORS and Laudauer Associates Inc.25 n/a n/a n/a $3.00-38.00-30.00 $35.00 $62.00-23.00 $40.000 sf and up 0 to 20.00-18.00-52.00-63.000 sf 60.75-3.000 sf 20.000-60.40 $4.00-37.00 $5.65 $3.75-4.00-55.00-43.00 $3.00-27.000 sf 20.00-21.00 $20.00-40.00 $14.00 $39.00 $25.00-80.50 $3.00-30.00 $30.00 $22.00-29.00-34.00 n/a n/a n/a $27.00-50.000 sf 60.000 sf 60.00-41.000 sf and up 0 to 20.
60 $1.30 31996 Comparative Statistics of Industrial and Office Real Estate Markets.48 $0.20 $0.10 $0.75 $1.05 $0.99 n/a $0.33 $1.41 n/a $0.85 $0.15 $0.03 $0.10 $0.25 $0.12 $0.00 $0.07 $0.25 $0.10 $0.35 $1.20 $0.87 $1.10 $0.20 $0.85 $0.15 $1.78 $2.15 $0.12 $0.05 $0.12 $0.10 $0.10 $0.10 $0.03 $0.15 $0.10 $0.08 $0. Cost $0.15 $0.16 $3.15 $0.10 $0. phone(202) 737-1150 13 .23 $0.20 $0.75 $1. Maint.50 $3.93 $1..07 $0.35 $1.60 $0.15 $0.75 $1.03 $2.50 $0.55 $0.23 $0.07 $1.93 $0.10 $0.70 $0.25 $0.35 $0.36 $0.88 $1.15 n/a $0.Table 3: Cost of Maintaining Space 3 Location Atlanta Boston Chicago Dallas Denver Los Angeles New York Orlando Phoenix Washington.08 n/a $0.50 $0.21 $0.C.30 $0.35 $0.35 n/a $0. D.60 $0.25 $0.50 $0.30 $0.80 $1.20 $0.14 $0.40 $1.10 $0. Society of Industrial and Office REALTORS and Laudauer Associates Inc.08 $0.25 $0.55 $0.45 $1.40 $2.35 $0.84 $1.15 $0.10 $0.75 $0.20 $0. Region Central City Suburban Central City Suburban Central City Suburban Central City Suburban Central City Suburban Central City Suburban Central City Suburban Central City Suburban Central City Suburban Central City Suburban ($/ft 2 /yr) Real Insurance Structural Common Estate (Fire and & Roof Area Total Taxes Liability) Maint.07 $0.08 $0.61 $0.
procedure) •What is the optimal rate of this process/procedure? •Why is this process/procedure the bottleneck? Defect Reduction •What percentage of products are inspected? •In what stages/locations of the process do the most rejects (or clean-up) occur? •What are the most common types of defects? •How much does each type of defect or clean-up cost per year (labor. The question list should accompany you to the plant and be used as reminders both in the sense of what to look for and what information to seek to complete an AR. purchased components. material.e. General •If you can make more product..Productivity Questions One more useful component of the Toolbox is a set of questions which can be asked (where they are applicable) to determine the likelihood of producing particular Productivity Enhancement ARs. what percent of existing inventory is considered excess? What is the value and quantity of overstocked goods in inventory? •Do standardized procedures exist for the processes where defects most often occur? •Does one machine operator produce significantly fewer defects than others? 14 .)? •What causes each type of defect? •Are in-process and/or finished goods inventories built up due to potential defect problems in the production process (to ensure that the customer gets the products on time)? If so. equipment. lost production time. can you sell it? •Do you ever run overtime to meet production goals or compensate for defective batches? (related costs) •Do you have any plans for expansion? •Average value and quantity of each type of inventory (raw materials. extra equipment or processes--i. in-process products. finished goods)? •What is the lead time of the product/process? ("product" could also be object for the next operation) Increasing Pieces/Person/Hour Bottleneck Mitigation •How has the operation changed over time? (product. regrind-etc.
(If so.) Quick Changes •How much time does it typically take to setup XYZ machine? •Do you need to do any adjustment to the machine? •Do you need to use any gauges or other measurement devices to adjust the machine? •How many different tools do you need for the setup of XYZ machine? •Can the setup be performed by the operator or is a specialist needed? •Do you need a period of time when you run pieces which are used just to get rid of initial problems? •Do you need to idle the machine for a while to bring it up to speed or to a proper temperature? •How do you clamp pieces to the machine? Do you use the same fasteners in all the cases? Labor Optimization •What percentage of the cost of production is labor? Direct / Indirect? •What is the pay scale? •What is the pay rate premium for late shifts? •Do you run overtime due to the lack of skilled personnel? •What is the cost of overtime? •Is this a union shop? •Do you ever work overtime to meet production goals? Why? •Are you lacking labor in a particular skill? •Are you keeping up with preventative maintenance? Preventive/Predictive Maintenance •Are there shutdowns of the production process? •Are these shutdowns unscheduled? •What are the duration and frequencies of these shutdowns? •What are the reasons for the unscheduled stoppages? •What is the cost/hour of production downtime? 15 . that operator’s expertise should be used to develop standardized operating procedures for training less effective personnel.
? If the answer is YES.Decreasing Cost/Piece Purchasing •How often are raw material deliveries received? •Are raw materials delivered based on the supplier’s convenience or planned needs at your facility? •How long do raw materials or purchased components remain at your facility before they are used? Floor Layout •Do you rent. it may be economical to scrap junk and use the freed space. or demolish dilapidated facilities) Scheduling •Do you have operations where different sequencing of jobs would eliminate some non-value added operations. lease or own the facility (or another)? (cost $/ft2 /yr) •How do you account for the cost (or value) of space? (cost $/ft2 /yr) •How many different products do you make? Inventory •How much floor space is used for each type of inventory? What is the assigned value (if any) of that floor space ($/ft2/yr)? •If it is determined that there is excess inventory of some type. identify these operations. setups etc. number of shifts. why is that excess inventory needed? Burden •Is new construction planned? How much and why? •Do you manufacture or store goods in any other building nearby? •Would you be able or want to have a rent paying tenant occupying any portion of your building complex? •Do you place any value on equipment or facilities which seem to be "junk"? (If not. 16 . overtime)? •Ask questions about ratio indicators. such as cleaning. What would be the right sequencing to eliminate these operations? •Do you have large size batch operations? •What is the company's operating schedule (including vacations.
Second ratio is speed of the process (rate of production) to sales rate.First ratio is production lead time to actual value added time to manufacture a part. •Identify processes or operations which you feel are more costly than they should be. why? •Do you experience multiple handling or multiple inspection? 17 . •Do you use push or pull system in your manufacturing process? •If overhead cost is too high. Third ratio is number of pieces to number of work stations or operators in a line segment.
CONCEPTS FOR PRODUCTIVITY ENHANCEMENT PART I Increasing Pieces/Person/Hour 19 .
Internal setup is the time used for setup while the process cannot continue. Changing from internal to external setup usually cuts time by 30% to 50%. Operators must be involved--external setup does not mean a different location or different people. Keeping setup changes out of the hands of the machine operators merely creates a class of setup experts. It is possible to divide the setup tasks into two groups: internal and external. it is critical to minimize their duration. one must study the shop floor conditions in great detail. The third step involves the streamlining of all setups. From the previous statements it is obvious that shortening of the internal setup time has much higher priority. Informal discussions with the workers and observation of the process often suffices. (Of course preheating can also be achieved using a source of heat other than waste heat. Even during a one day assessment it is possible to discover great opportunities for time savings during setups. Since production continues making useful goods in the meantime. although the estimated reductions might be less than if an extended investigation was conducted. The first step is to identify internal and external setup tasks. EXAMPLES OF HIGHER EFFICIENCY Preheating new dies for molding operations can be used as one example. One point should be brought to attention. Even additional heaters might be justified if the energy cost for preheating the molds is lower than the cost of imperfect runs). Storage areas could use waste heat from the molding operation and thus eliminate the necessity of running the cold press and producing unwanted parts which have to be reground and processed again later. thus cutting their time. it is not as essential as with the internal setups to cut down the time required for the external setups. Since internal set-up tasks require a break in production. In order to determine how to shift internal setups into external setups. The second step is to convert as many internal tasks as possible into external. 20 .Quick Changes Introduction The preparation of any machine to perform a specific task or operation is called setup time. External setup time is the time used to prepare machines and tooling for the next operation without stopping the process.
To achieve that using a vacuum pump takes quite some time. but this time the operation will take fraction of the original time. Another example could be standardizing the height of die. During the molding operation vacuumize the tank. The volume of the cylinder should be about 1000 times that of the mold cavity. 21 . The major benefit is the same shut height of the press. A quicker method of creating the vacuum in the mold is to attach a cylinder to the mold using tubing with a valve. die A Standardizing Shim at Clamping Height 80 50 30 die B 320 30 80 50 Clamp Height Standardization Clamp Height Standardization Die Height Standardization Shim for Standardizing Die Height Positioning of a jig on a table by trial and error adjustment can be virtually eliminated by machining center holes and corresponding pins. though. same size bolts should be used for all dies. Then.Vacuum molding needs an almost complete vacuum. Also. The adjustment of the height is tedious and time consuming and very critical for the proper operation of the press. If one is higher than the other. The process is finished with the vacuum pump to achieve complete vacuum. after preparing the mold. thus the operator doesn't have to change tools. welding of supporting legs can eliminate press shut height adjustment and enables the operator to use the same length bolts for clamping. Use of the same length bolts is a bonus. the valve is opened and the air from the mold will rush into the cylinder.
One should not be required to turn the nut all the way out of the thread of the screw. Use of U-shaped washers could also be implemented. Pear shaped holes for fasteners are another option.Attachment Plate die (set to h2/2 + Θ = K) h2/2 Θ X Y Jig for Adjusting Thickness centering jig on attachment plate (female) centering jig on machine (male) Centering Jigs One-turn clamping is a way to fasten and unfasten a piece using a single turn. especially getting it through a length of a bolt that is too long and doesn't help in any way in attaching. clamp The Clamp Method 22 .
In some cases the disparity among machines cannot be eliminated.) This can be accomplished by standardizing both processing quantities and processing times. Standardizing processing quantities can be achieved fairly easily. the highest output machine should not automatically be the targeted pace (meaning that there normally would be an effort to bring the capacity of slow machines up by parallel processing or other productivity 23 . The capacities of machines vary as well. In other words. (Based on available data. the real problem lies in standardizing processing times. If the waiting periods could be eliminated. common reductions are as much as two fifths. production time could be cut.clamping holes Fasten Here Attach and Remove Here Pear-Shaped Holes for Clamping by Turning Other great delays in production are caused not by inspection or transportation. This is because different machines perform various operations and do not take the same times. Then the goal should be at least not to produce more than necessary. but by time spent waiting for the processing of one lot to be completed before another lot can be processed.
The major difficulty in the production of relatively small quantity lots of any product is either the number of setup operations or the length of time it takes to perform them. The quantities produced should be the quantities needed. it is found that inventory is excessive and setup times rather long. Principles • Adjustment cannot depend on feeling or experience • Functional clamps should be used over screws • If screws are necessary. When demand calls for high diversity and low volume. that is external setup application • Movements should be combined or linked together • Parallel operations should be conducted • Setups should produce defect free products from the very beginning of the run • Quick connect and disconnect • Centering adjustments should not have to be made. In some cases the answers given will immediately alert the auditor and call for his attention. but the pace is set based on actual needs. design them in such a way that one turn will fasten and unfasten the fixture • Dovetail connectors. wedges should be used • Intermediary jigs should be used. frequent setups are necessary to produce a great variety products. one remedy is to build up inventory. after objective evaluation. If. The goal is not to overproduce because if something goes wrong all pieces in stock (or manufactured in the previous operation and waiting for the next machine) are wasted. However. The result could be that the fast machine has to wait.) Questions to Ask The auditor should always ask questions pertaining to setup times and practices. the time involved can be. etc.improvements). cams. The auditor should ask 24 . Asking how much time setups take is an obvious one. There is no absolute value for a proper setup time--an engineering judgment must be used. the reduction of a setup time should enable the reduction of inventory. It is important to bear in mind. Even if the number of setup operations cannot be reduced. pins. that while machines can be idle. it should be automatic when part are pressed together (using pins. workers must not be because the cost of manpower is generally far higher than the cost of amortizing machines. however.
a possible reason to consider is that the machine is waiting for a trained personnel to do the setup.questions which will give him answers as to whether the practices listed in the PRINCIPLES paragraph are used. • How much time does it typically take to setup XYZ machine? • Do you need to do any adjustment to the machine? • Do you need to use any gauges or other measurement devices to adjust the machine? • How many different tools do you need for the setup of XYZ machine? • Can the setup be performed by the operator or a specialist is need? • Do you need a period of time when you run pieces which are used just to get rid of initial problems? • Do you need to idle the machine for a while to bring it up to speed or to a proper temperature? • How do you clamp pieces to the machine? Do you use the same fasteners in all the cases? Symptoms/Indicators One of the most revealing indicators is excessive inventory. there could be a variety of reasons for an idle machine. • DECREASE CHANGE OF DIES & START-UP TIMES • USE FIXTURES TO REDUCE LATHE SET-UP TIMES • INSTALL A ROTATING NOZZLE CAROUSEL TO REDUCE SET-UP TIMES • EMPLOY MODULAR JIGS TO REDUCE PROCESS SET-UP TIMES 25 . Inventory build-up is one definite consequence of long setup times (among possible other reasons). However. it seems that the pictures and concepts are at least as helpful as the case studies. a great opportunity may present itself at once. Of course. Related ARs Two ARs are included under this category. Long lead times indicate large lot sizes and the reason for large lot sizes is most likely long setup times. If during the plant tour one notices idle machines. If not.
While this may not reduce the total time spent performing and preparing for the set-up. For example. Frequent set-ups are necessary to produce a great variety of different products. Further. it WILL reduce the amount of time that the production equipment is offline.4 4 Shigeo Shingo. long set-up times are not always necessary and should be avoided--especially when set-ups must occur frequently. 1985. "A Revolution in Manufacturing: The SMED System".operations which can be performed only when the machine is shut down (or at least not producing useful products) external setup -. Productivity Press.040.7 years (about 20 months) General Two major difficulties in the production of relatively small quantity lots of any product are: i) the number of production line changes (“set-ups”) required. and ii) the length of time it takes to perform each set-up.operations which can be performed while the machine is running The first step to reducing set-up times should be to shift as many operations as possible into the external set-up mode.820. Documented results across a wide variety of industries indicate that set-up times are commonly reduced by as much as 95% once reducing set-up times is identified as a priority and quick-change strategies are implemented. however. A solution to this problem is to deliver all needed tools to the machine PRIOR to shut down.Assessment Recommendation No.000 Simple Payback Period = 1. the tools should be organized so the technician knows exactly where each tool is located and no time is wasted searching for misplaced tools. p. 1 Decrease Die Change-Out & Start-Up Times Assessment Recommendation Summary Estimated Cost Savings = $1. 113 26 . it is a common mistake for a technician to waste valuable time by retrieving tools after the production line has been shut down.000/ year Estimated Implementation Cost = $3. The setup procedure can be divided into two operations: internal setup -.
there are 60 production changes per month. Production personnel stated that there are “many different paths to the same point. mechanical timings. Although there are “many different paths to the same point. The average set-up time was said to be about 20 hours. 27 . The set-up team. Since there is only one team capable of making the changes. consisting of 8 specialized technicians. and mold alignments.” establishing a standard set of guidelines about which path to take will reduce guesswork and the associated costly time delays. the 24-hour period available in one day is not fully utilized.Existing Practice and Observation The following description is based on our conversations with experienced staff and not actual observation of a procedure because during our visit a change of dies on the production line was not performed. The second stage of the set-up process involves the fine tuning of the glass temperatures. This second stage of the set-up procedure. Next. cooling air flows. brings in new dies and mounts them into the individual molding stations. Recommended Actions Reduce die change-out and start-up times by implementing the following: • Utilize the knowledge of your most experienced technicians to develop standardized procedures for all phases of change-out and start-up -. if a “start-up” procedure is still in process when the first shift set-up team leaves. the timing of the piston pushing the gob out of the fore-hearth is changed. and the intervals in between the shears' cuts are synchronized to produce the proper sized gobs. These procedures typically take anywhere from 1 to 4 hours. Since minimal written standardized procedures presently exist. depending on whether just the molds need to be changed or whether the process also needs to be changed. from the time the previous run is shut down until glassware of acceptable standards is obtained for the new product.This should include a sequence of start-up adjustments. no adjustments are made until the following morning and that night’s production hours are wasted. each technician goes about these adjustments in his own way and experience plays a large role in the speed of the adjustment process. Hence.” may take from 4 hours to 3 days. Most of these operations are presently carried out sequentially. the shoots leading to the individual dies are replaced.” meaning that each technician may use a different path but they are all experienced enough to eventually obtain the desired results. On average. referred to as “start-up.
including the development of standard procedures. this number was considered reasonable by the production manager. Based on the recommendations. Several of the suggestions above are already under investigation by plant personnel.This will save time during the change-out phase by allowing technicians to work on the upper level adjustments at the same time other technicians are performing mold change-outs and other lower level adjustments. Anticipated Savings Since the savings mentioned in the General section (a 95% set-up time reduction) seem too aggressive and also because they are based on sometimes time-consuming analyses of the setup operations.This will save time presently used searching for tools • Deliver all jigs. Based on the large potential cost savings. • Install Temperature Sensors -. the quickest possible implementation is recommended.This will allow quicker temperature adjustments and better control. our recommendation is based on estimates made by experienced staff at your company. to the machine prior to shutting down the production line -.This will minimize production line down-time which is presently used for retrieving these items • Develop a troubleshooting guide describing common start-up problems and their fixes -.• Design a tool kit which will hold all change-out tools in an organized manner and deliver the kit to the machine prior to shutting down the production line -. dies. we will consider saving only one fifth of the existing set-up time.This will reduce guesswork when responding to problems • Purchase and install two-level platforms -.This will allow quicker mold alignments. Being conservative. 28 . etc. These actions cannot presently be performed simultaneously. • Install Strain Gauges -.
based on a labor rate of $25. GSH.62/hr per production line ≈ $632/hr per production line We estimate the value of saved production time as $632/hr per production line.)(12 mon. Hence.06/hr) . In addition.(14. $10. VST = ($647/hr) . The value of raw materials added to the furnace for each production line is $10. 1989./yr)(20 hr/chg)] = ($45.000/yr) / [(84.06/hr.5 The value of the saved production time.Setup Times for All Lines) = ($45. molten gobs of glass are dripped into the basement and are later crushed and used as cullet. it takes 1. The following calculation is an estimate of labor saved by performing this recommendation6.000. is estimated as: VST = GSH .000 hrs/yr) . Facing America's Trash: What Next for Municipal Solid Waste The calculation assumes that the saved labor time is put to productive use in other areas of the facility.200 Btu/lb less heat to melt cullet than it does to make glass from virgin raw materials.32/hr per production line Thus.000.(60 chg/mon. VST. 5 6 Office of Technology Assessment. Even with all labor savings neglected.($10.The gross sales per processing hour. these cost savings have been omitted from our annual cost benefit estimates.000.96/hr.600 hrs/yr) GSH = $647 / hr per production line It is assumed that during set-up time. To be conservative. it was determined that it costs $5.32/hr less to re-melt the cullet which is collected during the set-up period as compared to virgin raw materials. the potential cost benefit is substantial.000/yr)/[(10 lines)(8400)hrs/yr . $5.CES where CMS = Cullet Material Savings. assuming that the time lost could have been used to produce salable products. 29 .($5.000/yr) / (69.06/hr per production line CES = Cullet Energy Savings. can be obtained as follows: GSH = Gross Sales / (Annual Operating Hours for All Lines . however.400 hrs/yr)] = ($45.CMS . From this value.32/hr) VST = $631. no additional raw material costs will be incurred for a production line as a result of the set-up period because the gobs will be recycled and added to the furnace as cullet.
72 / setup Hence.84 / setup per person) = $830.000.96/hr) x (4 wk/person/furnace) x .000/platform) = $50. including installation.20 x 20 hr = 4 hrs Wages Saved = ($25. The labor involved is estimated at 4 weeks of work for each furnace. .. would be: Annual Cost Benefit = (Production Time Saved) x (Value of Saved Production Time) ACB = [(60 chg/month) x (12 month/yr) x (4 hr/chg)] x [$632/hr] ACB = $1. ACB. x (40 hr/wk) x (8 people) x (3 furnaces) Labor Costs = $99. the cost of the required six strain gauges per die is $35. Based on a quote already obtained by facility personnel. Strain Gauge Costs = ($35. Platform Costs = (10 platforms) x ($5.686 2) The purchase and installation of jigs and strain gauges for all 78 production dies. Hence.82 x10 6 / year Implementation The estimated costs for the specific recommendations listed previously include: 1) Labor for equipment installation and preparation of setup tooling and standard procedures.96/hr.84 / setup per person Wages Saved per Setup = (8 people) x ($103.72 / setup) Wages Saved per Year = $0. Wages Saved per Year = (60 chg/month) x (12 month/yr) x ($830. Hence.000 per die) x (78 dies) Strain Gauge Costs = $2.96/hr) x (4 hr) = $103. Labor Costs = ($25.. the annual cost benefit..60 x 106 / year By reducing the present set-up periods by an average of 4 hours each.. for 8 people working 8 hour days at a labor rate $25.000 4) temperature sensors (3 per fore-hearth) 30 .73 x 10 6 3) ten two-level platforms.Time Saved per Setup = 0.
However. the estimated cost savings are considered reasonable.500/sensor) Sensor Costs = $165. the combined estimated implementation cost is: Imp. based on case histories from other facilities. Sensor Costs = (3 sensors/fore-hearth) x (10 fore hearths) x .04 x 106 The simple payback period can be calculated from the following equation: Payback Period = (Implementation Cost) / ES = ($3.7 years (about 20 months) Conclusion: It is important to realize the potential in implementing this recommendation. Cost = Strain Gauge Costs + Platform Costs + Sensor Costs + Labor Costs Imp. we hope that the above example will reinforce your present efforts to reduce set-up times and serve to focus your attention on this critical part of your operations. and conversations with plant personnel.82 x10 6 /yr) Payback Period = 1.73 x 106 + $50.500 a piece. Cost = $2.000 + $99.686 = $3.04 x 106) / ($1.. the present lengthy set-up times at your facility.000 + $165. We do not pretend to have thorough enough knowledge of your existing procedures to be able to specify the definite steps which are needed in order to achieve the indicated savings or an accurate implementations cost. x ($5. 31 . .000 Finally. It is assumed that 3 sensors per fore-hearth will be installed. Due to the large savings potential...The estimate is based on the price for an infrared temperature sensor capable of reading temperatures up to 3000 ˚F.. The sensors cost $5.
the cutting bits were changed inside the machine and because of close tolerances required.000/year Estimated Implementation Cost = $29. It is recommended that in the new process the bits are held in a holder which is mounted precisely in a predetermined position on the lathe machine. 32 . The change now encompasses the switching of a holder instead of the individual bits. Existing Practice and Observation A four-spindle lathe is used to machine the diameter of shafts used for the revolving blades in washing machines.000. Since it was a single purpose lathe machine the opportunity to convert internal setup into external setup was obvious.000. as is generally the case when gauges are employed. 2 Use Fixtures to Reduce Lathe Set-up Times Assessment Recommendation Summary Estimated Cost Savings = $378. That was one of the most time consuming adjustments. While the machine is running the bits are mounted into a holder and still adjusted using a variety of gauges. The company offers four different models of washing machines in terms of hardware. There are more models if software variations (therefore more programming options) are considered as well. A delicate adjustment needed to be made for the lathe cutting bits.Assessment Recommendation No. a number of gauges had to be employed. Perform the bit alignment while the machine is running and have the fixture ready for a swap when needed. The company sales are $70. Recommended Action Make fixtures for holding the lathe cutting bits. but the whole process became an external setup not taking time from production. Before the improvement program began. The production of the washing machines is at approximately one machine every ten minutes.180 Simple Payback Period = 0.08 years (about 1 month) Background The company makes washing machines which are sold around the world.
000) = 0.08 years = (approximately 1 month) 33 .180 Simple Payback = (29.5 min) x (1/60 hr/min) x 30 x 12 = $378 000/year ES = $378 000/year In this case the savings represent lost production on the machine.00/hr) x 1.5/piece) x (15 min .00/hr Time to Manufacture = 1 week People Involved = 3 Number of Fixtures Needed = 4 Labor = ($40.Anticipated Savings Material = $575/fixture Labor involved represents the manufacture of the fixtures. Implementation Labor Rate = $40.180) / (378.new time) x (# of setups/year) ES = (200 pieces/hr) x ($31.4 (fringe benefits) x (1 week) x (40 hr/week) x 3 (people) = $6. Average Number of Setup Changes per Month = 30 ES = (# of pieces/hr) x (value of a piece) x (original time .720/per fixture Implementation Cost = (575 + 6 720) x 4 = $29.
The production rate is about fifteen pumps an hour. The rotation takes a couple of seconds. Existing Practice and Observation The filling of the cylinder cavity is performed with nozzles which are positioned above the filling hole in the cylinder. As stated above. The pump models differ by size. Recommended Action The fix of the problem consisted of rotary mounting hardware making it adaptable to different types of pump cylinders.750 / year Estimated Implementation Cost = $4. the manual change and adjustment of the nozzles before the next type of a pump started being produced was eliminated.Assessment Recommendation No. even though the filling of the intermediate fluid was automatic when the production line was running.000. which are mounted on a single gearbox.200 Simple Payback Period = less than one month Background The company makes metering pumps predominantly for the American market. After the nozzle is properly adjusted it automatically fills the pump cavity. However. 34 . As a result of this improvement.200 per fixture. After the change. all the hydraulically actuated diaphragm pump arrangements share the basic idea of an intermediate fluid which has to be filled into the cylinder of a pump at a certain position as the pump proceeds on the line.000. the line had to be stopped for five minutes for the manual adjustment before the run could resume. Since the cylinder sizes differ. The company sales are $85. the nozzle has to be changed and repositioned every time there is a change of a pump size. For all that time the pump assembly line is shut down. Since the existing nozzles were utilized in the design of the rotating fixture. 3 Install a Rotating Nozzle Carousel to Reduce Set-up Times Assessment Recommendation Summary Estimated Cost Savings = $60. The change and position adjustment takes a skilled operator about five minutes. One pump assembly can have up to six different head arrangements. The pumps are hydraulically actuated tubular diaphragm type. the expenses were minimal amounting to approximately $1. the rotation is initiated by a switch which positions the multiple rotating carousel with different nozzle location into the proper place.
Anticipated Savings Material and Labor for the New Nozzle Carousel = $1. $1800 of expenses have to be added to the cost of the project. Implementation Implementation requires the manufacture and installation of the nozzle carousel ($1. The cost of material was estimated at $800 and labor at $400.material cost per piece) x (time saved) x (# of changes/yr) ES = (15 pieces/hr) x ($950/piece . Since 6 extra nozzles were needed. and gross labor costs will remain unchanged because the laborers who are presently waiting during the changes will be producing additional pumps during the recovered change time.200).07 years (less than 1 month) 35 . It was recommended to buy an extra set of nozzles as a backup in case of failure of existing ones. The cost estimate obtained from the nozzle manufacturer was $300 a piece. Energy cost increases are assumed to be negligible.200) / ($60.200 Average Number of Pump Sizes per Month = 10 ES = Estimated Savings = Net Sales Increase ES = (# of pieces/hr) x (value per piece .$500/piece) x (4.750/yr) Payback Period = 0. The simple payback period can be calculated from the following equation: Payback Period = (Implementation Cost) / ES = ($4. We have assumed that the only costs which will increase due to increased pump production are the raw material costs.750/year In this case the savings represent lost production on the line.5 minutes) x (1/60 hr/min) x 10 x 12 ES = $60.
The manipulation with the crane is completely eliminated. During setups. In addition. First reference holes were made. Recommended Action Employ jigs which would be modular. The cap was attached and the whole assembly bored out. in the meantime. The total time involved was five hours and forty-two minutes.000 ft2 steel beam construction type building. then a bolt hole was drilled. the drill had to be removed because it was in the way when the jigs were replaced. cleaned off with petroleum jelly. Centering adjustments were required when a jig.115 Simple Payback Period = 0. The operators. The number of employees at this location is 170.1 years (about 1 month) Background The company manufactures connecting rods for combustion engines.450/yr Estimated Implementation Cost = $8. The sales are about $30.Assessment Recommendation No. That way the heavy base part of a jig can stay in place all the time and different parts of the jig are replaced as needed.000.000/yr. Existing Practice and Observation The aluminum die cast parts were delivered into the stock. the trained setup technicians came to perform the desired change. The oil hole was drilled followed by large end cut. was lifted onto a table. The facility is housed inside a single 200. were cleaning around the line. 36 . All the modular parts must be manufactured with centering holes or grooves so manual adjustment after installation is not needed. The jigs for different operations were very heavy and therefore they had to be removed with the help of a crane. 4 Employ Modular Jigs to Reduce Process Set-up Times Assessment Recommendation Summary Estimated Cost Savings = $117. Then the parts were transferred to the line where they went through the following process.
000.000 ES = PLM + Wages Saved = $63.96/hour = $3.000 x 1. The time to perform the setup is estimated to take about one hour.1 years (about 1 month) 37 . The main bodies of existing jigs can be used. PLM = [(25 chg/month) x (12 month/yr) x (4.450 / year where PLM = Production Lost Money Wages of qualified mechanic = $40.7 hr/chg)] x [$45/piece] = $63. Based on the same wage structure as for mechanics the cost of the change would be: COST = (8 hours x 5 days x 3 weeks) x $25.000 Wages Saved $40.Anticipated Savings There is an elimination of one person during the setup operation because now the adjustment is not needed and the operator can perform the task alone.115 Material cost was estimated for $5.450 / year where ES = Estimated Savings Implementation Implementation requires manufacturing eight different fixture subassemblies.115 The simple payback period can be calculated from the following equation: Payback Period = (Implementation Cost) / ES = ($8 115) / ($117 450/yr) Payback Period = 0. Total Cost = $8.35 fringe benefits = $54.000 = $117.450 + $54. The time involved is estimated as three weeks.
including scrap. this will increase revenue. Discussions about this topic with machine operators is advised. it may not use more energy. or by (idle) machines. be the real bottleneck. 39 . In most cases. For example. plastics. labor. however two cautions are noted here. by parameter control (temperature. In most instances. It is usually identified by waiting. and metals. however. industries that have high internal rejection rates may not require more raw materials if the defect rate is reduced. Increasing the production rates can have additional costs involved. glass. such as increased raw materials.Bottleneck Mitigation Introduction A bottleneck in manufacturing is that process (or procedure) which restricts the entire operation from running faster. it is important to realize that the perceived (or “theoretical”) bottleneck may not. Examples of such industries are paper. They might not define a process/procedure as a bottleneck if a defective part is produced and it can be re-used as a raw material. in fact. however it could also be used to reduce production lead time. or an existing one optimized. It can also be accomplished by the purchase of manufactured parts. Identifying and alleviating a bottleneck in the manufacturing process allows an increase in throughput (pieces/person/hour) of a particular process. the recommendation may not require more labor. the issue should be brought up during the interview. Upon questioning. Changes in the specifications of the thread eliminated this bottleneck at a minimal cost to the company. Conversely. a sewing factory manager described the hand threading of the needles as the bottleneck. or of the entire plant. Second. Alleviating bottlenecks is often accomplished by installation of improved equipment or tools. or higher quality raw materials. operators complained that the quality of the thread made it difficult to thread the machines. or energy use. If a new piece of equipment is installed. many companies do not consider the effect of the net production rate. If alleviating the bottleneck also reduces re-work. these quantities should remain constant or even decrease in some cases. the relationship between increased revenue and increased profits will be based on the amount of information available and should be handled on a case by case basis. First. either by workers. In order to identify a bottleneck. humidity). On a per unit or per piece basis. on a bottleneck. if possible.
for people. machines. equipment. HUMIDITY) USE AVAILABLE "LESS EFFICIENT" EQUIPMENT 40 . procedure) • What is the optimal rate of this process/procedure? • Can you sell more product. if you can make it? • Are you considering expansion? • Why is this process/procedure the bottleneck? • Do you ever run overtime to meet production goals? (related costs) Indicators / Symptoms • Waiting .Questions • How has the operation changed over time? (product. tools • Excess Inventory (raw materials or in process) • Excessive motion or transportation Related Recommendations • • • • • PURCHASE / INSTALL MORE EFFICIENT MACHINERY PURCHASE BETTER TOOLS CHANGE THE SPECIFICATION OF RAW MATERIALS CONTROL PROCESS PARAMETER (TEMPERATURE. product.
Assessment Recommendation No. 5 Add Machine Operators to Reduce Production Bottleneck Assessment Recommendation Summary Estimated Cost Savings = $208,780 /yr. Estimated Implementation Cost = $47,520 Estimated Payback Period = 0.23 years ( ~3 months )
Existing Practice and Observation During interviews with plant personnel, it was stated that the production bottleneck in the plant should be the tire press division; however, it was noticed that the tire presses are idle for about 10% of the time because they are waiting on in-process material from the previous process (tire machines). Automatic and manual tire machines construct the structure of the tires so they can be molded in the presses. There are 75 automatic and 50 manual tire machines. The automatic tire machines process 9 tires per hour and require only one operator. The manual machines are less efficient, producing only 6 tires per hour with one operator. With two operators, the manual machines can each produce about 9.7 tires per hour. Since this results in a lower tires per person rate (and a higher labor cost per tire) in the tire machine division, only one operator is presently used on the manual machines. The operating cost for the tire presses are relatively unchanged by increases in production, so if the presses were to operate at maximum capacity there would be very little additional operating costs. According to management, the company can sell all the tires it can produce (at the current price) and opportunities to increase the total plant output are of great interest.
Recommended Action A second machine operator should be added to the manual tire machines in order to increase the production enough to keep the tire presses operating continuously. The additional operators on the manual tire machines will increase the cost of producing each tire in the tire machine division, but will lower the overall production cost per tire by eliminating the existing idle time of the tire presses. Idle time at the tire presses is a waste of the labor efforts of the press operators.
Anticipated Savings Under the present operating conditions, at maximum output the tire machines can only produce 23,400 tires a day and are doing so. If a second operator is added to the manual tire machines for all shifts, the maximum daily output from the tire machines division will be 27,840. If the tire presses are operating continuously they can only mold 26,000 tires a day, so it will not be necessary to keep two operators on all of the manual machines during every shift. Only enough extra operators to increase production to 26,000 tires per day will be will be needed to eliminate the idle time of the presses. The number of estimated additional operator-shifts per week is 88. We have conservatively assumed that the only costs per unit which will be affected by the increased production of tires will be from these two divisions (machines and presses). As the total production is increased, the total costs for each other division will increase but the cost per unit should remain the same. For example the total cost for raw materials will increase because more tires will be made, but the raw material costs per tire will not be affected. These increases in total cost will be proportional to the increase in revenue from sales of the new tires. The annual total cost savings, ATS, achieved by the addition of a second operator on some of the manual tire machines can be determined using the following equations: Operating cost with one operator on the manual tire machines: CIA = The cost per tire (tire machine division) with only one operator CIA = [ (CPO x HRO ) x (NAM + NMM) ] / TAO + TMC CPO = Cost per hour for machine operator HRO = Hours of production operation NAM = Number of automatic machines operating NMM = Number of manual machines operating TAO = total amount of tires produced per day with one operator TMC = cost to operate the tire machine for each tire CIA = [($32.50/hr x 24 hrs) x (75 + 50) ] / (23,400 tires) + ($0.75/tire) CIA = $4.92 per tire in tire machine division CTP = The cost per tire to mold the tires produced by single operators CTP = (NTP x HRO x CPO) / TAO + CPT NTP = number of tire presses (there is one operator per tire press) CPT = cost to run the press per tire CTP = (145 presses) x (24 hrs) x ($32.5 / hr) / (23,400 tires) + ($0.33/ tire) 42
CTP = $5.16 / tire TTPO = The total for the two processes with one operator TTPO = CIA + CTP TTPO = $4.92/tire + $5.16/tire TTPO = $10.08 per tire Operating cost with two operators on manual tire machines: CSO = cost per tire (tire machine division) with second operator CSO = (CPO) / (MPR) + TMC MPR = additional tires/hr produced by second operator on manual machines CSO = ( $32.5 / hr ) / (3.7 tires / hr) + ($0.75) CSO = $9.53 / tire The extra tires that are produced will not require any additional operators at the presses, therefore no labor costs at the presses will be associated with the additional tires--the workers will now be producing tires during the time previously spent waiting for tires to be delivered. The only additional costs that will be incurred at the tire presses are for the increased maintenance and energy costs of the machinery. CPS = cost for the press to make additional tires (no additional labor costs apply) CPS = CPT CPS = $0.33 per tire TTPT = Total cost per tire for the two processes with two operators TTPT = CSO + CPS TTPT = $9.53 / tire + $0.33 / tire TTPT = $9.86 per tire The unit savings per tire, UST, for additional tires produced will be: UST = TTPO - TTPT UST = $10.08 / tire - $9.86 / tire UST = $0.22 per tire Finally, the total annual cost savings, ATS, can be calculated using the following formula: 43
Not included in the above savings calculations is the additional revenue produced by the sales of the extra tires. CTO = NOW x THT x CPT NOW = number of workers to be trained THT = number of hours that the workers will be trained CPT = The hourly rate paid for time while training CTO = (88 workers) (24 hours) ($22.467. can be determined using the following equation. the increased annual revenue obtained from producing the extra tires (not including the savings calculated above) would be (0.400/yr.22/tire ) (2.400 tires. It was stated that the cost per tire will only change in these two areas if the additional operator is used on the manual tire machines.520 / ($208.10) x ($26. the cost per tire will drop as the presses begin to operate at a rate closer to 100 percent.600 tires/day) (365 days/yr. CTO. Assuming a 10% profit on each tire. From the previous conclusions.50 /hr) CTO = $47.520 Payback Period = Implementation Cost / ATS = $47. The cost per tire will drop to $25. The total cost to train the operators.78 for the additional 2600 tires produced. Implementation and Simple Payback The additional workers that are hired to work on the manual tire machines will have to be trained to operate the machines.23 yrs ( ~3 months ) 44 .00 when operating the presses at a 90 percent level. a twentytwo cent drop from the cost to make the first 23.00/tire) x (2600 tires/day) x (365 days/yr) = $2.ATS = SPA x NAT x DPY SPA = Savings per additional tire produced NAT = Number of additional tires produced per day DPY = Production days per year ATS = ($0.) ATS = $208.780/yr) = 0.780 / yr The company has determined the cost to make one tire including all expenses is $26.
mixing them with pigments and other additives.000. This new machine would cost approximately $150. They stated that the sheets would stick together if the surface temperature of the finished product was above 100˚ F. 45 . 6 Install Refrigeration System to Cool Product Assessment Recommendation Summary Estimated Additional Revenue = $285. The operators feel that high humidity levels are the cause of the sticking.611 Simple Payback Period = 7 months Existing Practice and Observation The process of manufacturing thin plastic sheets for the printing industry involves melting the raw materials and pellets. According to the manufacturer of the equipment. packaged and shipped. Tests in the production area have indicated that the humidity levels are not above those recommended by either the manufacturer of the cutting machine. Management has indicated that the company sells all of the sheets produced and would like to increase production levels in order to gain increased market share. in fact. Discussions with management reveal that your company is considering the purchase of a second machine to reach production goals. The reduced production rate is due to the fact that the sheets stick together if the machine is run any faster. a temperature parameter that is being exceeded. and passed through a cutting machine which cuts them into the desired finished width and length. Measurements of the surface of the film indicated temperatures averaging 120˚ F. The bottleneck in the process is the cutting machine which is presently running at approximately 1000 sheets per hour. The option of air conditioning the entire facility to alleviate the problem was rejected by management.700/yr Estimated Implementation Cost = $13. They are then stacked to a pre-determined count. and molding them into rolls. The rolls are then trimmed.Assessment Recommendation No. this machine should be producing 1500 sheets per hour. Further discussions with the manufacturer of the raw materials uncovered that it is. or the supplier of the raw materials.000/yr Net Profit Increase = $24.
600 $1.Recommended Action Install a refrigeration system with ducting to blow cool air both under the sheet leaving the cutting machine. with one ducted to the bottom of the leaving sheets.10) .) add 10% Total 46 = $10.000 Btu/hr air conditioning units be purchased. Anticipated Savings The operating cost of the refrigeration equipment is estimated to be about $3.. of refrigeration is required to reach desired temperatures and production rates. and on top of the stack of film.000 hr/yr) x ($0. Estimated Savings = Net Profit Increase = IP x hr x V x P . We also recommend that the unit have the capability of recording the production rate of the cutting machine.000 $396 $378 $1.095/sheet) x (0. and the other directed to the top of the stack.$600/ ton 200. and with alarms. etc.($3.700/yr Implementation Implementation of this recommendation requires that two 100. Refrigeration units .237 $13.611 . Savings = $24. Savings = (500 sheets/hr) x (6.800/yr) Est. Calculations show that 180. This will provide some redundancy in the event that one unit is out of commission.000 Btu/hr.. Each unit should be controlled by an infrared temperature sensor.800/yr.OC Where IP = increased production/hr hr = hours of production 30 hrs/shift x 4 shifts/wk x 50 wk/year V = Value of Product ($/sheet) P = Profit Margin (assumed to be 10%) OC = annual operating cost of the refrigeration equipment Est.000 BTU x $600/ton Infrared Temperature Sensors (4) Controller (2) Labor: 20 hr x 2 installers x $40/hr Ancillary Equipment (utilities.000 BTU/hr x 1 ton/12. The controllers should be specified with either Proportional Integral or Fuzzy Logic Control.
It is believed that lowering production cost can result in increased sales and profits Recommended Action Purchase a new automatic multi-head machine tool which is estimated to produce 180 pieces per hour to replace three of the current machines.360 $66. The new machine is expected to use the same amount of power per part but have only a 1% spoilage rate.080 hours per year.720 $1.976 $1.000 including installation and removal costs of three old machines. Current production is 440.28 years (~ 3.100.000.Assessment Recommendation No.546 per part $191.000 more pieces could be sold if produced.000 per year for these pieces.000 per year. This machine can still be operated by a single operator.4 months) Existing Practice and Observations Machined piece orders have been sufficient to use the full year's time of four machine operators.000 47 .000 $382.85% for the current machines.000/yr Estimated Implementation Cost = $67. Raw material costs are about $1. Annual sales are $2. Increased demand for pieces indicates that up to 50. The new machine cost is estimated as $75.741. Anticipated Savings Annual Sales per year/Parts per year Current Direct Labor Cost Fringe Costs for Labor (35%) Current Cost of Raw Material Overhead at 200% Direct Labor Total Estimated Cost = = = = = = $4.000 pieces per year. Spoilage rate (defects) average 3. Competition has been putting pressure on the company to maintain its profit margin and sales level.100.500 Simple Payback Period = 0. Competition is making inroads on profit margin. Direct labor costs for the machine operators are estimated to be $23 per hour and the operator works 2. 7 Replace Old Lathe With New Automatic Multi-station Tool Assessment Recommendation Summary Estimated Increased Profit = $239. Overhead (Burden) costs are estimated at 200% of direct labor costs for this company. Production on the four present machines has been 220 pieces per hour.
850 is the increase due to decrease in cost per part and the remaining $42.000 $382. then conservatively: Future Direct Labor Cost Fringe Costs for Labor (35%) Future Cost of Raw Material Overhead Total Estimated Cost = = = = = $95.000/yr . The salvage value of the three old machines is estimated to be $7. If it is estimated that overhead costs will remain the same due to increased debt costs and perhaps marketing and sales costs.$259. Assuming all the goods can be sold at the current price per part the profit would be: 480.687.589/part Estimated Profit margin = 15% Estimated Profit = (Annual Sales .957 per part Profit per part (estimated) = $4.28 years (~ 3.000.000/yr = $239.000/yr) = 0.Annual Costs) = $259.Estimated Cost Per Part = $3.$3.957/part = $0. but decreased direct labor costs. Implementation and Simple Payback The cost of the new machine with installation is $75.510 per part) = $497.000/yr Of this increased profit about $196.$3.957 per part .175.500.$3.660 pieces per year.960/yr The increase in profit would be: $498.680 $33.000/yr Using the new machine and one of the current machines production will be 480.447 per part The manufacturer will thus have room to increase profit margin and produce more parts than the previous years.500) / ($239.546/part .000 Estimated Cost Per Part = $3.660 parts/yr x ($4.150 is due to the increased sales with a better margin.510 per part = $0.510 per part Cost Savings per Part = $3.720 $1.500 and the simple payback is: ($67. The net implementation cost is then $67.4 months) 48 .490 $1.546 per part .
the most difficult task in identifying and estimating the potential benefits of an assessment recommendation is obtaining reliable information. 2) determining why those defects occur. and causes of product defects are normally well-known by quality control personnel or machine operators. Feedback from the sensors to machine operators may be achieved using 49 . The time between the detection of the defect and feedback to the process line is often hours or days--too long to be of much use. the nature. is that they are intended only to separate the defective products from the good products. frequency.” or high “internal scrap rate. it does very little if anything to reduce the number of defective items produced. Often.Defect Reduction Introduction The concept of defect reduction should be a focal point when considering potential productivity improvements in industrial facilities. wasting labor efforts. and requiring increased costs for inspection. provide valuable feedback either to machine operators or directly to the process equipment. While this effectively reduces the number of defective products which are passed along to the customer. more importantly. Such a process is said to have a low “internal yield. Time spent producing defective parts can be costly to manufacturers. and 3) recommending actions which will reduce or eliminate the defects. energy.” In such a case. The first two items above can normally be determined by questioning plant personnel (see the question list in the next section for guidance). raw materials. One note of caution: it is important to distinguish between defect rate and scrap rate. the defects may be “hidden” from management (because there are no defective parts to be seen) but may result in significantly reduced productivity because the number of acceptable items produced by the machine or process will be less than optimal. A shortcoming of many statistically based quality control systems. installing new sensors may be a common solution or at least part of the solution. Sensors can be used to detect the occurrence of defects and. inventory. A process can yield a large number of defects but zero scrap if the defective items are re-used in the process. Fortunately. Once the nature of the most costly defects are identified. where inspections are performed at the end of the production line. The major tasks involved in making a defect reduction recommendation will be: 1) identifying those defects which are most costly. material handling. and clean-up.
sensors may be used to perform 100% inspections with high reliability and a very low cost. broken or chipped tools. shutting down the process or machine is recommended unless the start-up efforts are extensive. Immediate feedback can also be used to prevent “serial defects” (a large batch of defective products) by shutting down the production line until the cause of the defect is identified and fixed. material. Various types of sensors are available which can be used to detect parameters such as: • Positions • Pressure • Shapes (2D or 3D) • Temperature • Dimensions • Humidity • Presence of foreign matter • Vibration • Damage/Displacement • Counts or cycles • Color mismatch • Timing The most thorough quality control system is one in which 100% of the products are inspected after each process. temperatures. audio. humidities. This feedback can be used to identify the causes of defects and can lead to equipment. positioning. movements. or process control feedback. etc.. or repair it. They have the capability to inspect at high rates of production and provide visual. When defects commonly occur as abnormalities or isolated incidents. but to automatically reject the defective part and scrap. it is usually best not to shut down the production line. process. sometimes the defect can be detected before it occurs. If the conditions which cause a defect are known (e.flashing lights and/or buzzers which are triggered by the sensor output. 50 .).g. Often. pressures. however.) are needed. pressure. In cases where serial defects are a common problem. or by indicating to the operators that parameter adjustments (temperature. In fact. etc. Defects should be detected as soon as possible after they have occurred to avoid additional value-added processes from being performed on a product which is already defective. Using people to conduct 100% inspections would be extremely expensive and impractical in most circumstances. or procedural modifications which will reduce those defects in the future. and feedback from the point of defect detection to the operation which caused the defect is immediate. sensors can be installed to detect when those conditions occur and adjust the appropriate parameters or stop the process before defects are produced. recycle.
that operator’s expertise should be used to develop standardized operating procedures for training less effective personnel. PROCESSES. etc. how many man-hours per year. Related ARs • MODIFY EQUIPMENT. what percent of existing inventory is considered excess? What is the value and quantity of overstocked goods in inventory? • Do standardized procedures exist for the processes where defects most often occur? • Does one machine operator produce significantly fewer defects than others? (If so. OR ADDING VALUE TO DEFECTIVE PARTS) 51 . lost production time. SERIAL DEFECTS. AND COUNT DEFECTIVE PARTS AND PROVIDE FEEDBACK (TO REDUCE INSPECTION COSTS.)? • What causes each type of defect? • If you can make more product..) Symptoms/Indicators • High defect rates • High scrap rate • Large in-process or finished goods inventories • Large inventory of scrap • Frequent regrinding. extra equipment or processes--i. regrind--etc. can you sell it? • Are overtime hours ever worked to meet production demands or compensate for defective batches? If so. and at what average pay rate? • Are in-process and/or finished goods inventories built up due to potential defect problems in the production process (to ensure that the customer gets the products on time)? If so.e. OR PROCEDURES TO REDUCE PRODUCT DEFECTS • DEVELOP STANDARDIZED PROCEDURES TO REDUCE PRODUCT DEFECTS • INSTALL SENSORS TO DETECT. repair/rework. in-process recycling. material.Questions to Ask • What percentage of products are inspected? • In what stages/locations of the process do the most rejects (or clean-up) occur? • What are the most common types of defects? • How much does each type of defect or clean-up cost per year (labor. REJECT.
POSITIONING. HUMIDITIES. MOVEMENT. ETC.) • INSPECT PARTS EARLIER IN THE PRODUCTION PROCESS (TO REDUCE ADDING VALUE TO DEFECTIVE PARTS) • INSPECT RAW MATERIALS PRIOR TO PROCESSING OR WORK WITH SUPPLIERS TO IMPROVE RAW MATERIAL SELECTION OR QUALITY (TO AVOID DEFECTS) 52 . PRESSURES.• INSTALL SENSORS TO DETECT AND CONTROL CONDITIONS WHICH LEAD TO DEFECTIVE PRODUCTS (TEMPERATURES.
A mechanical device (“swing-arm”) then slides the glassware onto the moving conveyor.Assessment Recommendation No.” 2) during the turn in the conveyor line at the “star” wheel. the operator knows the necessary adjustment to make. When the line operator notices that the glassware from one of the molding stations is repeatedly being knocked over. Based on experience.) is needed in order to significantly reduce the amount of fallen glassware for an extended period of time. 53 . the time from when the glassware begins to be knocked over until the operator fixes the problem was observed to be extensive (resulting in 10 or more consecutive tipped glasses before the problem was fixed). a significant percentage of the glassware on several of the production lines was observed to be knocked over during movement from the molding stations to the entrance of the Lehrs (annealing ovens). the operator makes a small adjustment to the swing-arm to eliminate the problem. Diagram #1. it seemed as if the operator was “fighting a losing battle” and that re-design or modification of the transfer devices (swing-arms.160/yr Estimated Implementation Cost = $152. Although the required adjustments are minor and usually take less than one mold cycle to perform (less than 10 seconds). Most instances of fallen glassware occurred at locations 1 and 3. These locations are indicated in AR#8. interfaces between conveyors. etc. 8 Reduce Defects By Reducing Bottle Tipping Assessment Recommendation Summary Estimated Production Time Savings = 630 hrs/yr Estimated Cost Savings = $398. At the molding stations. The bottles were typically knocked over during one of three processes: 1) when being slid from the molding stations onto the conveyor line by the “swing-arms. At a typical molding station. Due to the need for the operator to make such frequent adjustments. rakes.4 years (5 months) Existing Practice and Observation During the assessment visit. and 3) while being pushed by the rake from the molding station conveyor onto the Lehr conveyor.094 Simple Payback Period = 0. there are 6 to 8 molds and swing-arms which the operator must monitor and frequently adjust. freshly molded glassware is removed from a mold and placed on a level surface next to the conveyor.
Diagram #2). No additional knock-downs occur at the raising rakes. Diagram #1: Plan View of Glassware Transport System from Molding Stations to the Lehr Entrance The rake at the Lehr entrance moves back and forth across the molding station conveyor to (and from) the Lehr conveyor. the rake pushes glassware onto the Lehr conveyor. Diagram #3). On the forward stroke (from the molding station conveyor to the Lehr conveyor). According to facility personnel. On the reverse stroke for several of the production lines. On other production lines. the rakes were observed to remain just above the conveyors and therefore knock over the glassware which moved behind the rake while it was in front of the molding station conveyor (see AR#8. the rake is raised on the reverse stroke so it passes over the glassware (see AR#8. all rakes are presently capable of raising on the return stroke and rake motion adjustment is a common part of the 54 ."star" wheel 1 mold conveyor 2 Molding Station "swing-arm" 3 Lehr Lehr Rake Lehr conveyor rake slides bottles from mold conveyor onto lehr conveyor AR#8.
and some shapes are more prone than others to being knocked over. 55 . design changes which may reduce the knock-over rate for small glassware may not work for large glassware (and vice-versa). According to the selector personnel in the “cold room” inspection and packaging area.production line set-up procedures. Facility personnel claim that 9 of the 10 production lines have frequent problems with fallen glassware. it may also help reduce the amount of fallen glassware to attempt to schedule similar (in terms of size and shape) glassware to be produced on the same line whenever possible. Tall. Since there is a wide degree of variance between product sizes and shapes. slender. and 2) the rakes which push the glassware onto the Lehr conveyor. Recommended Action Reduce product defects by installing sensors which detect when glassware is being knocked over and provide immediate feedback (a flashing light) to the line operators. modify (or re-design) the mechanical devices which are causing the glassware to fall over. glassware which exits the Lehr and has been knocked over is immediately rejected because of surface defects. More importantly. and/or “top-heavy” glassware is most susceptible to falling over. Observations of inefficient rake motion on the day of the assessment may indicate that either some of the rakes are prone to becoming “unadjusted” or that the rake adjustment portion of the set-up procedures is sometimes not properly performed. On the line(s) with non-raising rakes and glassware with a geometry susceptible to tipping. 25% of the glassware entering the Lehr was observed to be knocked over. These sensors should also be capable of recording the number of tipped bottles which occur over a period of time (per shift) to provide feedback to management regarding machine and operator performance. Hence. primarily: 1) the “swing-arms” which slide the glassware onto the conveyor in front of the molding stations.
Rake Back Lehr Position #2 .Represents a fallen bottle Lehr Positon #1 . Diagram #2: Plan View of Glassware Transfer from Mold Station Conveyor to the Lehr Conveyor 56 .Glassware Knocked over on Rake Return AR#8.Rake Forward Lehr Position #3 .
Improperly Adjusted Rake Travel Path Glassware Lehr Lehr Rake Mold Conveyor Lehr conveyor Properly Adjusted Rake Travel Path Glassware Lehr Lehr Rake Mold Conveyor Lehr conveyor AR#8. Diagram #3: Existing Rake Travel Paths--Improperly Adjusted Travel Path Results in Fallen Glassware on Return Stroke 57 .
the required quantity of acceptable glassware will be produced in a shorter amount of time) can be used to make other products and no production line idle-time will occur as a result of the increased production rate. This assumption is based on observations by our assessment team on the day of our visit and. Twenty-five percent of the glassware on those 9 production lines is prone to tipping due to the size and shape of the products. The annual production hours for a production line are considered to be the annual plant production hours minus the average monthly set-up hours per production line. Actual reductions in fallen glassware should be greater. no units = annual production hours. an average of 10% of the glassware entering the Lehrs is knocked over. This is viewed to be a conservative assumption. Seventy-five percent of the fallen glassware can be prevented by implementing this recommendation. • • • • The annual cost savings. as much as 25% of the glassware entering the Lehrs on several of the production lines was observed to be tipped over). again. The time saved due to the decreased defect rate (if the defect rate decreases. is considered to be conservative (on the day of the assessment. hrs/yr = fractional productive time (fraction of the facility operating hours for each production line which are non-setup hours).RR) x SLR where NPL APH FPT = number of production lines with tipping problems. no units 58 .Anticipated Savings This analysis includes the following assumptions: • Nine of the production lines have frequent problems with fallen glassware (based on interviews with facility personnel). ACS. based on results achieved in other industrial facilities. was calculated as follows: ACS = NPL x APH x FPT x PFTG x FTGA x FTG x (1 . For the glassware shapes which are prone to tipping.
the annual production hours per production line. the annual cost savings is estimated as ACS = (9)(6960)(0.(1440 hrs/yr) APH = 6. According to facility production management. Finally.0. hrs/yr total number of monthly production changes (“set-ups”). APH = (8400 hrs/yr) .35)(632) ACS = (9)(70 hr/yr)($632/hr) = (9)($44.TMS x (12 months/yr) x AST / TNPL where.83)(0. The average combined set-up and change-out time is about 20 hours.35 for the typical rejection rate. FPT. for a total of 8400 hrs/yr. no units average duration of a set-up period. FPT = APH / FPH = 6960 / 8400 = 0.83.960 hrs/yr The fractional productive time. Thus. Thus. we will use a value of 0. no units FTG = fraction of “tippable” glassware (fraction of products on these production lines whose shape and size make them prone to tipping).75)(0.PFTG = present fraction of tipped glassware (fraction of the total glassware that was observed to be tipped over).25)(1 .240/yr) 59 = = = = facility’s annual production hours. FPH TMS AST TNPL Thus. Production lines in the plant are in operation 24 hrs/day. about 60 glassware “shapes” are produced in a typical month. no units FTGA = fraction of tipped glassware that is avoidable. $/hr (per production line) According to facility management. no units . no units SLR = shutdown loss rate (cost per hour for a production shutdown). APH. 7 days/wk.10)(0. Each “shape” change requires a mold change-out and process set-up. is the fraction of the facility operating hours for each production line which are non-setup hours. no units RR = typical rejection rate for a batch of glassware.(60 set-ups/month)(12 months/yr)(20 hrs/set-up) / (10) = (8400 hrs/yr) . hrs total number of production lines in the facility. can be estimated using the following equation: APH = FPH . RR. Hence. 50 weeks a year. thirty-five percent of the glassware produced is rejected.
documenting the most common causes of fallen glassware on each production line and the actions taken by the mold operators to correct each type of problem. resulting in a total estimated project cost of $120. Fabrication. at $100/hr . for a total of $20. This will expose the mechanical components which need to be re-designed and may also suggest possible solutions (based on the mold operator’s present methods of repairing each problem). A representation of the proposed tipped glassware sensing system is shown in AR#8. representing a [(70 hr/yr) / (6960 hr/yr)] x 100% = 1% productivity increase. The mounting bracket for the sensors should allow the vertical adjustment of the top sensor to allow the system to be used for glassware of various heights.000. A set of two through-beam optical sensors would be needed at each sensing station. Re-design of the mechanical components is estimated to require 200 engineering hours. 2) setting off a beacon (flashing light) to warn the line operator of the problem. 60 . and installation of new components is estimated at a total of $100.000 in engineering expenses. Diagram #4. with one sensor located just above the conveyor line at the bottom of the glassware and the second sensor located at an adjustable position vertically above the bottom sensor. this estimate is considered to be higher than the expected costs but is subject to change dramatically depending on the required modifications which are uncovered by the in-house study and engineering recommendations. Based on results in other facilities. The production lines should be observed for extended periods of time. The system would be capable of sensing: 1) when a bottle (or a number of bottles in a pre-set period of time) has fallen.000. 3) rejecting the fallen bottles using compressed air (to prevent wasted time in the cold room handling fallen glassware). and 4) recording the pieces of fallen glassware during a pre-set period of time.160/yr The number of hours per year which would be made available for producing additional products if the bottle tipping problems are improved is estimated as 70 hr/yr (per production line). purchase.ACS = $398. Implementation Re-design and modification of the mechanical devices which are causing the glassware to fall over will require an in-house study.
Diagram #4: Proposed Tipped Glassware Indicator System 61 .Optical sensor setup #1 emitter receiver Result from upright bottle warning beacon Power supply power supply power supply solenoid valve Inputs to PLC Inputs to PLC From sensors from sensors output to sensors Outputs from from PLC results of sensors Molding Station PLC Lehr Lehr Inputs to PLC Power supply from sensors power supply Optical sensor setup #2 emitter Output from results of sensors Result of tipped bottle receiver warning beacon Power supply power supply solenoid valve AR#8.
4 years (5 months) 62 . $148 each for the warning beacons. and $203 each for the optical sensors.566 per production line. The approximate cost for the components are $860 for the PLC. only the bottom beam will be interrupted and a signal will be sent to the PLC which. This is shown in the “Optical sensor set-up #2” box in Diagram #4. Hence. $49 each for the solenoid valves. two solenoid air valves and four through-beam optical sensors would be required to place two sensing stations on a production line. One PLC can control at least two of the sensing stations.160/yr) Payback Period = 0. two warning beacons.094) / ($398. and 3) add to the count of fallen glassware. the total installed cost for the fallen bottle sensing system would be $3. Implementation will also require the fabrication of adjustable mounting brackets (for the optical sensors) which can be created in the company machine shop.160/yr) = ($152. will: 1) switch on the beacon.If a bottle is upright.094) / ($398. the beam from both sensors will be interrupted and no action will be taken by the programmable logic controller (PLC). in turn. or $32.094 for 9 production lines. The simple payback period can be calculated with the following equation: Payback Period = (Implementation Cost) / ACS = ($120. 2) momentarily open the solenoid valve on the compressed air nozzle (to blow the fallen bottle off of the conveyor).000 + $32. An approximate cost for the design and fabrication of the sensor mounting assembly is estimated at $1000. If a bottle has fallen. Modifications to the existing compressed air line to allow the use of the solenoid controlled compressed air bottle rejecters would cost an additional $500 per system. This is shown in the “Optical sensor set-up #1” box in Diagram #4. The purchase and installation of a programmable logic controller.
If the gaskets have any type of defect or did not mold properly to the part. The operators who don't realign their machine have an acceptance rate of 99 out of 120. He was taught how to do this by another operator but there is no company procedure to teach the newer operators how to realign the machines. All the gaskets that don't meet standards are recycled and all the parts without gaskets are cycled through the process until they receive an acceptable gasket. The part also gets sent back and has to go through the process again.Assessment Recommendation No. Several of the more experienced operators are able to receive much higher incentives than the rest because of their larger acceptance rates.74 per gasket. The other 21 gaskets are removed. All the inspection is done by separate personnel to ensure that there are no unacceptable gaskets being allowed to be packaged. and remolded so that they can be re-applied to other parts. The average worker applies 120 gaskets an hour to the automotive parts and approximately 99 of the gaskets pass the final inspection.881 Estimated Payback Period = 0. After the gaskets have cooled the parts receive a final inspection before being packed for shipping.753 / yr Estimated Implementation Cost = $60. The contracted rate the company receives for making and attaching the gaskets is an average of $0. Each worker that applies the gaskets receives incentives determined by the average amount of acceptable gaskets that they can attach per day. re-melted. 9 Develop Standard Procedures to Improve Internal Yields Assessment Recommendation Summary Estimated Cost Savings = $95. The operators that realign the machines have an acceptance rate of about 105 out of 120. Workers take the gaskets while they are hot and mold them onto the parts to allow the gasket to cool and solidify.67 years (8 months) Existing Practice The plant receives unfinished automotive parts from other companies and is contracted to make and attach rubber gaskets onto the different automotive parts. One operator explained that he is able to produce less defects because he realigns the machines before each of his shifts. the rubber gasket is then removed and placed back into the rubber melt to be reused. 63 . The experienced workers do not offer to teach all the new operators because they feel it will hurt the incentives that they receive. The gaskets are attached to the parts so the parts can be packaged and shipped to the retailers.
64 . However. then twenty percent of the operator's time and the energy required to melt the rubber are wasted. API.)(0. will be the increased amount of acceptable units per hour that the operators will be able to produce. but if twenty percent of the gaskets have to be removed and re-melted. units per hour NPR = new average production rate.Recommended Action Use the knowledge of the best machine technician to help reduce the internal scrap rate of gaskets for the less experienced operators. the internal defect rate (defects which occur within the process) was found to be about twenty percent for most operators. The realignment alone will increase the acceptance rate of the gaskets by approximately 6 percent. The re-melting ensures that there is no wasted material. IPR = new production possible from increased rate IPR = NWS x NOS x HPS x DPY x (NPR .120 units per year ATB = annual production lost due to aligning machines before each shift ATB = NOS x NWS x DPY x TTA x NPR TTA = time required to align machine each time ATB = (2 shifts)(22 workers/shift)(260 days/yr.399 units/yr. Anticipated Savings The annual increased production.166 hrs/alignment)(105 units/hr) ATB = 199.OPR) NWS = number of workers per shift NOS = number of shifts operating HPS = number of hours per shift DPY = number of days per year in operation OPR = old average production rate. Have the technician develop a company procedure for realigning the machines so all the operators can realign the machines before their shifts. The company has a low shipped defect rate because it inspects every gasket before packaging and removes all the bad gaskets to be re-melted.ATB where. This can be determined by the following equation: API = IPR . units per hour IPR = (22) (2 shifts) (8 hours/day/shift) (260 days/yr) (105 -99)(units/hr) IPR = 549.
the annual increased production will be: API = (549. we have neglected these extra savings. will be the additional profit earned from the increased output of gaskets.74/unit) (37 % ) ACS = $95.(199. There will be no additional labor needed to produce these additional units so the cost of the labor per unit will be zero.753 / yr. will be the time that the production is down for the training of operators and the time the experienced operators need to create the standard operating procedures.721 units/yr) ($0. The annual total cost savings. Implementation The production lost due to implementation. This will result in an increased profit margin. In an effort to be conservative. The cost of this production time can be determined as follows: PLI = PDT + TCP where PDT = production lost due to down time for training PDT = DPD x PPD DPD = number of days production will be down PPD = production per day 65 .Hence. It should be noted that the machine maintenance and energy costs per acceptable part will also decrease and contribute to the above savings. PLI. the profit on the additional gaskets was calculated to be 37% because of the absence of labor costs.) . Estimating the existing profit margin to be 10%.721 units per yr. ACS.120 units per yr.399 units per yr. The profit per gasket will now include the money that was budgeted to go toward the labor of the gasket because the additional gaskets have no labor costs. ACS = API x PPU x PM PPU = price received per unit of output PM = profit margin ACS = ( 349.) API = 349.
472 units + 16.272 units ) ($0.800 units Hence.881 (The number above is higher than the actual costs because it includes raw material and energy costs which wouldn’t be increased during production down time.74/ unit) ITC = $60.272 units The total cost of implementation. the production lost from implementation is: PLI = 65. ITC = PLI x PPU ITC = ( 82.) Payback Period = Implementation / API = $60. Payback Period = 0. will be equal to the cost of the units lost. ITC.472 units TCP = production lost from operator working on standard procedures TCP = NOF x TPR x TWP NOF = number of operators working on procedures TPR = production rate for these operators TWP = time spent working on procedures TCP = (4 operators) ( 105 units / hr) (40 hrs) TCP = 16.736 units/ day) PDT = 65.800 units PLI = 82.881 / $95.753 / yr.PDT = (2 days) (32.67 years (8 months) 66 .
000/hour $30. These are ARs which can be related to unwanted shut downs of the assembly/production lines. however.000/hour $100.000/hour Questions to Ask • Are there shutdowns of the production process? • Are these shutdowns unscheduled? • What are the duration and frequencies of these shutdowns? • What are the reasons for the unscheduled stoppages? • What is the cost/hour of production downtime? 7Revelt. Ohio. i. 67 . annual sales. sub-categories of PM which can form the basis of useful recommendations and which can be presented in a way likely to provoke management into implementing them.7 Estimated Downtime Costs for Selected Industries Forest Industries Food Processing Petroleum & Chemical Metal Casting Automotive $7. Savings may be present in terms of reduced energy costs and repair costs from improved maintenance practices . There are. Jean. These generally fall under the heading of risk management which is important to the manufacturer but difficult to properly assess during a one day audit. Linclon Electric Company. Cleveland. Evaluating Electric Motors. If the company cannot (will not) indicate the cost per hour of production downtime it can be easily estimated with normally obtained data. etc.e.000/hour $200. operating hours. raw material costs.000/hour $87. Examples of costs for downtimes in various industries are summarized in the following table.Preventative/Predictive Maintenance (PM) Introduction There are many economic analyses which point out the value of PM but they are usually of a complexity and detail to make them useless for the IAC director during a one day audit. labor costs. but we expect that the greatest cost savings will result from reduced downtime.
• ELIMINATE SHUT-DOWNS OF CONTROLS DUE TO OVERHEATING • TREND MOTOR TEMPERATURES AND VIBRATIONS LEVELS TO PREDICT MOTOR FAILURE 68 .Symptoms/Indicators This type of recommendation will probably only be identified by discussion with plant personnel as the occurrence of an unscheduled shut-down while you are present is unlikely. but asking questions may elicit an entirely different AR than the two we present here. Related ARs Two case studies are included under this heading. The rewards for recommendations which can reduce or eliminate these shut-downs can be reported with some confidence and be logically defended. it is possible to identify the cause of the shut-downs and their duration. The scheduled shut-downs should be investigated to see if they would benefit from "quick change" approaches. Since the shut-downs are usually documented by the line foreman or other management.
the computer sometimes shuts down during second or third shift when the available staff is not trained to fix the problem. When these controls shut down. To prevent another shutdown. about 16 hours of production line shutdowns were caused by these cabinets overheating in 1995.e. This problem has existed during very hot weather since the systems were installed. This results in even longer production shutdowns of up to 7 hours. these controls shut down whenever the internal temperature in the cabinets exceed 85˚F.5% of the cooling hours. the cabinet is opened and a reset button must be pressed. There are two computer controls which are most susceptible to overheating shutdowns. The minimum shutdown period consists of 15 minutes to re-start the computer and at least another 30 minutes to re-start the production line. Once the problem is traced to the computer cabinet.09 years (1 month) Existing Practice and Observation During the assessment visit. According to a plant electrician. Common engineering practice is to design cooling equipment to provide the desired room temperatures for 97. To avoid dust build-up in the cabinets. Both are located in the Process Control/Computer Room (see Figure 1). the associated production line stops.Assessment Recommendation No. One is referred to as the “516 Forming Controller” and the other is the “570 Electronic Commander.5% of the cooling season (i. the doors are closed as soon as the outdoor temperature is low enough for the HVAC system to maintain the desired room temperature. In addition. indicating that the cooling equipment for the room is undersized (no additional heat generating equipment has been added to the room). 10 Eliminate Shutdowns of Controls Due to Overheating Assessment Recommendation Summary Estimated Productivity Savings = 16 hrs/yr Estimated Cost Savings = $10. several computer systems “crashed” (shut down) because the internal temperature in the computer control cabinets exceeded the maximum allowable cabinet temperature. for 2. a typical system is undersized and will not be able to maintain the 69 .” According to a plant electrician. The cost of lost production when a line is shut down is estimated to be about $632/hr per production line.112/yr Estimated Implementation Cost = $812 Simple Payback Period = 0.. the doors to the cabinet are left open and fans are placed in the room until the room temperature becomes cool enough to allow the cabinet doors to be closed again.
In addition to either of the recommendations above. $/hr (per production line) 70 . This procedure should be presented to all qualified staff who may be in the facility when this problem arises. Recommended Action Eliminate costly production shutdowns due to overheating computer control cabinets by installing temperature sensors and warning lights on the cabinets. the sensor can be installed inside the cabinet and wired to a warning light which can be installed on the cabinet exterior (or another. Since the shutdowns are said to occur when the internal cabinet temperature exceeds 85˚F. A standard operating procedure should be written by personnel on the electrical staff who are presently trained to deal with these problems.desired room temperatures). the warning light will flash indicating to the technicians in the control room that the cabinet should be opened in order to prevent a production shutdown. neglecting the potential costs in lost production caused by the room overheating. A more expensive solution would be to install additional cooling equipment to ensure that the room remains cool enough during all hours of the year. more visually noticeable location). can be calculated as follows: ACS = ALPT x SLR where. should be attached to the cabinets to minimize time wasted searching for someone who is qualified to correct the problem. ACS. ALPT = annual lost production time due to overheated computer controls (for all production lines combined). When this temperature is exceeded. A list of these staff members. The sensor can be set to send a signal to the warning light when the internal temperature of the cabinet exceeds 80˚F. The existing cooling equipment may have been sized in this manner. Anticipated Savings The annual cost savings. hrs/yr SLR = shutdown loss rate. This will minimize lost production time. control room personnel or someone on the electrical staff for all shifts should be trained on how to get the computer system back on-line whenever a shutdown due to overheating occurs.
This system is shown on the following page. or 2) rearranging the cooling system supply and return air ducts to provide more efficient cooling.Thus.1 years (about 1 month) As mentioned previously. 71 . Other feasible options may include: 1) increasing the cooling capacity of the existing cooling system (install an additional cooling unit).112/yr) Payback Period = 0. or $165 per system. Payback Period = (Implementation Cost) / ACS = ($812) / ($10. a 5 amp relay. and an AC/DC voltage adapter. implementation of the overheating warning system will require the purchase and installation of a temperature sensor. These options would be more expensive than the proposed warning system but would likely also result in a return on the invested capital in less than two years. there are other alternatives to solving this problem and eliminating costly production shutdowns which occur as a result of overheated computer controls. Unit Cost $115 $86 $15 $25 $165 $406 No.112/yr Implementation For each of the two computer control cabinets. a warning beacon. The bottom line is: the control shutdowns are economically avoidable and there are a number of options available. ACS ACS = (16 hr/yr)($632/hr) = $10. of Warning Systems Needed 2 2 2 2 2 2 Total Cost $230 $172 $30 $50 $330 $812 Item Description Temperature Sensor Warning Beacon 5 Amp Relay AC/DC voltage adapter Labor (6 man-hours) Total Hence.50 per hour. The resulting total approximated installation cost is $812. The material costs for these items are shown in the table below. The estimated installation for each system will require about 6 hours at $27.
4 C Warning Beacon Computer Control Cabinet Computer Control Cabinet 72 .Proposed Warning System Ac/ Dc voltage adaptor (power supply ) 5 Amp relay switch Temperature Sensor 69.
11 Begin a Predictive / Preventive Maintenance Program Assessment Recommendation Summary Estimated Cost Savings = $21.Assessment Recommendation No. Savings for each of the above were estimated as follows: 73 . The combined ratings of these motors total 3. motors and process equipment operate in a very hot environment which contributes to shortened component lives and equipment failure rates which are higher than normal . 2) Reduced motor rewind costs. and the furnace air supply fans.2 years (about 2 months) Existing Practice and Observation Presently. thus allowing the avoidance of costly process downtime. including air compressors. These factors combine to result in unexpected (and costly) process downtimes.353/yr Estimated Implementation Cost = $4. In addition. some motors and process equipment were observed to be very dirty and poorly maintained. An outside consultant can be hired to perform periodic measurements and/or organize and train your staff to perform them. As a result. Anticipated Savings Cost savings can result from three areas: 1) Reduced un-planned process downtime. and 3) Reduced motor electricity costs. and motors are repaired only when failure occurs. etc. Neglecting small motors (conveyor motors. very little preventive maintenance is performed at the facility due to a stated lack of manpower.). cooling fans.200 Simple Payback Period = 0. Recommended Action Establish a predictive/preventive maintenance program which will include periodically cleaning equipment and taking measurements on critical process equipment which will indicate potential problems and allow the scheduling of maintenance and repairs to a convenient time.350 hp. there are about 20 motors which are critical to production operations.
labor union requirements. Cost of Rewind = ( N40 x RWC40 + . Since records of motor repairs and costs were not available. the number of rewinds was reduced to about 20% of the total. Using 8 hours per replacement. . motor rewinds represented 85% of the total number of motor repairs (on average).168/yr 2) Reduced motor rewind costs. availability of a replacement motor. no units 74 . motor replacement could take much longer. . The average cost of a motor rewind for this facility was estimated as: Ave. . the table below was used to obtain an average cost per motor repair for both the existing maintenance methods and after a preventive maintenance program has been established. x (Cost of Lost Prod. + N800 x RWC800 ) / NT where Nn RWCn NT = number of motors at the facility with horsepower “n”. 6) installing and aligning the replacement. + Nn x RWCn + . and 7) restarting the process line. . including: 1) accessing the motor. 3) unbolting. 2) electrical disconnection. It is assumed that similar results can be achieved at this facility. After preventive maintenance programs were established. 5) acquiring the replacement motor.) = (3 failures/yr) x (8 hrs/failure) x ($632/hr) Production Cost Savings = $15. Time/Failure) . Depending on the size of the motor. Utility representatives have indicated that in a survey of facilities with no preventive maintenance programs. and the nature of the production line. and assuming there are 3 un-planned motor failures per year on critical process motors. 4) motor removal. the estimated production cost savings due to implementing a preventive maintenance program is: Production Cost Savings = (Motor Failures/yr) x (Lost Prod. . . no units = total number of motors (considered in this analysis) at the facility. no units = estimated cost of rewinding a motor with horsepower “n”. it takes about 8 hours to remove and replace a failed production motor.1) Reduced Un-Planned Production Downtime: According to a survey of maintenance references and consultants.
S. and de Almeida. Repair Costs = (4 motors/year)($1.074 $1. G.053/repair For four motor repairs per year.053/motor) = $4.735 The average cost of reconditioning (bearing replacement.258/rewind Estimated Average Cost of Reconditioning a Motor (for this facility) = $752/recondition Then.157 $1.258/rewind Existing Average Repair Cost per Motor = $2.032/motor) = $8. varnishing.M. 264.15 x $752/recondition + 0. the existing repair costs are estimated as: Existing Repair Costs = (Motors Repaired/yr) x (Average Repair Cost) Existing Repair Costs = (4 motors/year)($2.. Repair Costs = (Motors Repaired/yr) x (Average Repair Cost) P. alignment. hp 40 60 75 100 125 250 800 Cost of Rewind 8 $1. Assuming the cost of rewinding a motor is 3 times that of reconditioning a motor. Shepard.85 x $2. cleaning. = 0. etc.M..20 x $2.020 Cost of Reconditioning 9 $340 $431 $500 $536 $606 $971 $2.M.M.578 Recondition vs.) program is established. 75 .212/yr 8 9 Nadel.M.M. Greenberg.820 $2.80 x $752/recondition + 0. The results for both are: Estimated Average Cost of a Motor Rewind (for this facility) = $2.000 $1.032/repair and after a preventive maintenance (P.295 $1. A. program are estimated as: P.) a motor for this facility was estimated similarly.610 $1. Average Repair Cost per Motor with P.214 $1.944 $5. p. Existing Average Repair Cost per Motor = 0.500 $1.258/rewind Average Repair Cost per Motor with P.128/yr and the repair costs after implementing a P. M..915 $7. S... Katz.Motor Size. Rewind Premium $680 $864 $1. Energy Efficient Motor Systems. = $1.
. the annual reduced motor repair costs are estimated as: Reduced Repair Costs = Existing Repair Costs .02) x (0.746 kW/hp) x (Elec.212/yr = $3. Although it is difficult to accurately estimate motor system efficiency improvements which are achievable in your facility without performing a complete survey of the motor systems. . and will assume these savings to be 2%. vibration. Repair Costs Reduced Repair Costs = $8. x (Percent Savings) x (0.128/yr .746 kW/hp) x ($0. Cases have been documented where the efficiency improvement resulting from improved maintenance practices was as high as 10-15%.916/yr + $9.350 hp) x (0.P. .699/yr Total Cost Savings: The total estimated annual cost savings provided by instituting a preventive maintenance program for your motor systems is: Total Cost Savings = Production Cost Savings + Reduced Repair Costs + Energy Cost Savings Total Cost Savings = $15. Among other factors.0308/kWh) Energy Cost Savings = $9. and temperature measurements.0308/kWh) = (314.75) x (8400 hr/yr) x (0.M.168/yr + $3.887 kWh/yr) x ($0. Usage Cost) = (3.783/yr 76 . program. these savings could result from: • Improved lubrication • Proper alignment and balancing • Correction of voltage imbalances • Reduced motor temperatures • Reduced efficiency losses caused by motor rewinds and failures • Improved drive system performance Energy savings are estimated as: Energy Cost Savings = (Total hp of Motors Considered) x (Load Factor) x (Operating Hours) . .M.916/yr 3) Reduced Motor Electricity Costs.$4. power.699/yr = $28. we recognize that efficiency improvements would most likely occur as a result of implementing a P.Hence. including voltage.
The electrical instrumentation required should already be a part of the existing instrument supply.230/yr + $1. The continuing investment is estimated to be $6. and 2) continuing investment.200/yr = $7. for a total of $3000. The above costs are of two types: 1) initial investment. The bi-annual inspections would each require one day and.783/yr . Additional material costs for items such as filters and lubrication will be greater than normal initially.430/yr and the initial investment is estimated to be $3. 2) Materials: A vibration meter and temperature probe can each be purchased for about $1000 and $200.96/man-hour) = $6. respectively. and about 30 motors can be diagnosed per consulting day. would cost $1200/yr.353/yr) = 0.200 = $4. 3) Consulting Costs: It is assumed that a preventive maintenance consultant will be required to provide initial support and training for the program.353/yr The simple payback period for implementing a motor preventive maintenance program would be: Payback = ($4. The consulting rate is about $600 per day.200.000 + $1. The initial training is estimated to require 5 days at $600/day. together.200) / ($21. but it is assumed that over time these costs will be negligible in comparison to benefits resulting from reduced repair costs and increased operating efficiencies.$7.Implementation The costs of implementing a preventive maintenance program were estimated as follows: 1) In-house Labor: Estimating that it would require 2 hours of an electrician’s time per month per motor to perform preventive maintenance procedures. the in-house labor costs would be (1 hrs/month/motor) x (20 motors) x (12 month/yr) x ($25.230/yr.2 years (about 2 months) 77 . then provide on-going inspections bi-annually. Subtracting the continuing investment from the total cost savings yields: Net Cost Savings = $28.430/yr = $21.
Labor cost saving opportunities arise when worker’s Time or Skills Are UnderUtilized. Many factories have operations that have remained unchanged for decades. Workers are performing tasks better performed by automated equipment, such as inspecting or packaging. Some are being asked to move product excessive distances, wasting time and labor dollars. Ineffective production leads to a disinterested, discouraged and inefficient work force. Workers perform less than ideally when (they feel) their efforts have little or no effect on the result. Examples of this include unclear definitions of defects, duplicative inspection, and equipment that goes out of adjustment as soon as it is corrected. In order to apply new technologies, workers need to be trained in their operation. Training of the existing work force can meet company's needs without the expense of hiring of new personnel. Manufacturers sometimes have idle workers because work rules don't allow them to perform different tasks. It is not uncommon to find manufacturers that are not keeping up with maintenance, because the maintenance crew is busy "putting out fires"; yet other workers have time to spare. Some of these firms are even in a hiring mode, intending to introduce more skilled labor while existing personnel are under-utilized. This is particularly troublesome when the firm does not need full time help. In these cases, many companies will run overtime shifts to meet production levels. Development of Standard Operating Procedures will allow manufacturers to demystify the process/procedure and train or cross-train existing personnel to perform needed operations efficiently. Particular attention should be paid to the employee who is an "artist" or an "expert". The existence and acceptance of this practice is a guarantee of variance in production, and an obstacle to training personnel. For example, a factory that had "expert" set-up men who took as much as eight hours to get a process running acceptably. When asked what the particular settings were, they responded that there were no dials for the settings, and those settings were not prescribed, but adjusted by "feel.” After the set-up was standardized and the company conducted training courses, other workers were able to set up the process in half the time, markedly increasing the yield of the production line. Counterproductive Incentives have also been a culprit in the effort to optimize labor. Arguments about which end of the line produced a defect, and incentives that encourage an employee to keep "secrets" of production to himself/herself are common. Elimination or modification of the incentive in doubt will allow all workers to share a common goal, increased 79
quality production, and encourage sharing of successful experiences. Piece-work is a particularly insidious danger. A manufacturer of cast steel valves for the nuclear power industry had three separate operations performed on the part before checking to see if the casting was acceptable. The reason? The machinists got paid for piece-work. If these machinists had only worked on good castings, the production rate of the factory would have increased dramatically, reducing the labor cost, and therefore the overall cost of a piece. Most workers, if given the proper information and tools, would prefer to produce a quality product.
• What percentage of the cost of production is labor? Direct / Indirect? • What is the pay scale? • What is the pay premium for second and third shifts? • Do you run overtime due to the lack of skilled personnel? • What is the cost of overtime? • Is this a union shop? • Do you ever work overtime to meet production goals? Why? • Are you lacking labor in a particular skill? • Are you keeping up with preventative maintenance?
• Idle workers, machines, or tools • Ineffective production, or operations • Excessive transportation or motion (walking, etc.) • Excessive hand labor
• INSTALL AUTOMATED EQUIPMENT • ELIMINATE SHIFT WORK • ELIMINATE/REDUCE OVER TIME BY TRAINING OR CROSS-TRAINING EMPLOYEES • INTRODUCE JOB SHARING (TRAINING) • SUBCONTRACT WORK • ELIMINATE/MODIFY INCENTIVE PROGRAM • DEVELOP STANDARD OPERATING PROCEDURES TO REDUCE LABOR COSTS
Assessment Recommendation No. 12 Install Automated Glassware Packing Equipment Assessment Recommendation Summary Estimated Cost Savings = $1,109,432/yr Estimated Implementation Cost = $1,600,000 Simple Payback Period = 1.44 years (17 months)
Existing Practice and Observation Various grades (qualities) of glass are sold, with the quality depending on the customer’s standards. The following table is a breakdown of the percentage of total production for each glass quality grade at this facility during the month prior our assessment, including the percentage of bottles packaged for each grade. Selection (Grade) A+ A B+ B C+ C CTotals Percent of Sales 0.17 0.55 22.30 41.49 1.66 33.19 0.64 100% Percent Packaged 49.19 46.70 59.44 57.08 71.31 67.38 70.59 61.3%
Presently, 100% of the glassware exiting the Lehrs is manually inspected and packed. According to management personnel in the quality assurance department, glassware requiring a grade quality of “B” or lower could be packaged by automatic packaging machines--this is the method used in some other cosmetic glassware manufacturing facilities. According to the table above, about 77% of the products sold during the month prior to our assessment could have been packaged using an automatic packing machine.
The present actions of each inspector/packer include: 1) removing the glassware from the conveyor, 2) examining the glassware for small cracks by holding it in front of a light at various angles, 3) placing the good pieces in boxes for shipping and the rejected pieces back on the conveyor to be dumped onto the cullet collection piles in the basement, 4) taping or gluing the filled boxes shut, and 5) retrieving new boxes and packaging materials. Because many of the defects are very small and would be difficult to consistently and reliably detect automatically using optical sensors, 100% manual inspection is believed by management to be a “necessary evil” to ensure that only quality products are shipped to customers. However, the inspecting process occupies less than 50% of the time of an inspector/packer. Almost half of the company’s employees work in the cold room inspecting and packaging operations (289 out of 600 employees). According to management personnel in the quality assurance department, inspector/packers are assigned to each production line according to the speed of the production line. It is estimated (by management) that each person can inspect 22 to 25 pieces per minute, and the typical production line has at least 4 inspector/packers working at a time. As many as 7 inspector/packers at a time are assigned to the faster lines. Furnace #7 and the four connected production lines are used primarily to produce the high volume/lower grade (quality) products which would be best suited for automatic packing. In addition, plans have been made to increase the capacity (tons/day) of furnace #7 in the near future, making the installation of automatic packers even more attractive Recommended Action Install automatic glassware packaging machines on the Furnace #7 production lines.
Since the small nature of many of the common defects are thought to necessitate manual inspections, the value of the inspector/packer’s time should be maximized by using them primarily to inspect glassware. With a case packer installed, the workers on the conveyor line will be able to devote most of their time to the valuable inspecting process. 82
500/yr.5 x 4 workers/line = 2 workers/line. • • • 83 . the annual cost to the company for each inspector/packer is 1. or box size changes. More than 50% of the inspector/packers’ time is presently spent performing actions associated with packaging. This is viewed to be a conservative assumption. Adjustments will be necessary when the number of pieces per box. only one machine should be installed initially to allow a performance evaluation and design improvement period.Anticipated Savings This analysis includes the following assumptions: • Four packaging machines will be installed. There are approximately 6 shape changes per production line per month. It is assumed that a properly designed packaging machine will be capable of eliminating at least half of the present labor efforts (or nearly all of the present packaging labor).000/yr with a 35% overhead rate. one on each of the #7 furnace production lines. piece shape and size. Based on previous experience with similar packaging equipment in similar applications. each re-adjustment will require 30 minutes of a skilled operator’s time. and each shape change will require the packaging machine to be re-adjusted. the equivalent hourly rate of a skilled packing machine set-up technician is assumed to be $25. This assumption is based on installing the packing machines on the lines which produce the high volume/lower quality glassware.000/yr = $40. The average annual earnings for an inspector/packer is $30. According to manufacturer’s literature. based on interviews with management in the quality assurance department and observations during our on-site assessment. The typical number of inspector/packers presently working on each production line is 4. After the initial system has been properly adjusted and has proven its worth. or 0.96/hr.35 x $30.000 and. the remaining machines should be installed. personnel in the quality assurance department at the facility felt that a reduction from 7 to 3 workers on one line would be reasonable. with an overhead rate of 35%. based on $40. Each packaging machine will allow the re-assignment of two laborers per shift. Of course. Also. for four shifts. layers per box.
50 (no units) Vf = volumetric flow of air to a packing machine. 0. These savings were estimated as follows: ACS = NP x [ LE x NS x CPL .23 hp/scfm K = conversion constant.39/kW-month EUR = average cost of electricity usage. 8400 hrs/yr EDR = average cost of electric demand. may be estimated using the following equation: MEC = [ KW x UF + Vf x HP x K ] x [ EDR x (12 months/yr) + HRS x EUR ] where KW = rating of electric heaters.). $10.0308/kWh 84 . units = hr/change = hourly rate for a packing machine set-up technician. units = $/yr/person = monthly shape changes per production line. In addition. units = shifts = annual cost per laborer. $0. During normal operation.MSC x (12 months/yr) x ST x THR .MOC] where NP LE MLR NS CPL MSC ST THR MEC = number of automated packers to be installed. no units UF = usage fraction for electric heaters (fraction of time operating). clearing an occasional jam.The annual cost savings. 0. MEC. units = people/line/shift = number of shifts during which the packer would be used. 0. scfm HP = power required for a centrifugal compressor to produce compressed air at 100 psig. ACS. each machine requires a maximum of 10 kW of electric heat for the hot-melt box closing system and 50 cfm of 100 psig compressed air. units = changes/month/line = packing machine set-up time per shape change. units = $/yr According to manufacturer’s information. etc. manual operation of a packing machine is estimated to take 25% of a laborer’s time (for keeping the machines loaded with cardboard and glue. no units = laborer equivalence for each automatic packer (number of laborers it would take to perform the work of one automated packer). units = people/line/shift = labor required for operating a packing machine.746 kW/hp HRS = annual hours of operation. units = $/hr = annual electric operating cost for a packing machine. The annual electric operating cost for each packing machine. the electric heaters are on about 50% of the time. achieved by installing automatic packaging equipment will be due to avoiding labor expenses which are required when the products are packaged manually.
0308/kWh) ] = [ ($1. include corrugated spacers between the glassware. Adjustability is required for this application due to the variety of sizes and shapes of glassware which are manufactured on each production line.50) + (50)(0.358/yr) ] ACS = $1.207) ] = (4)[ ($283. (201)575-6350. 85 .207/yr Thus. 10 Supermatic Package Machinery Inc. NJ.0308) ] = [ (163 kW-month/yr)($10.25)(4)(40.0.MSC x (12 months/yr) x ST x THR .746) ] x [ (10.(6)(12)(0..694/yr) + ($3.109.MLR) x NS x CPL . The conveyors which presently extend from the Lehr exits to the opening of the cullet trenches will most likely need to be replaced or supplemented by conveyors designed to properly feed the automatic packing machine.23)(0.96) .513/yr) ] MEC = $5.(5.($5. and eject the packed box onto a finished goods conveyor.500/yr) . Fairfield.432/yr Implementation Case packers are available which can perform all of the following operations: • • • • • • construct the boxes.Substituting the appropriate values. pack the glassware in the boxes in single or multiple layers. organize the inspected bottles into the desired grid.207/yr) ] = (4)[ ($277.($935/yr) . glue or tape the box closed.500) .39/kW-month) + (114. the estimated annual cost savings can be calculated as follows: ACS = NP x [ ( LE . MEC = [ (10)(0.39)(12) + (8400)(0. This additional expense has been considered and is included in the estimated implementation costs.10 Case packers are commonly used in the glass container and cosmetics industries and machines are available which have the capability of being used for a wide range of products.5)(25.MEC] = (4)[ (2 .064 kWh/yr)($0.
The installed cost for the conveyor system was estimated to be about $50. Savings and implementation costs for automatic inspecting have not been considered in this recommendation. determine if containers are acceptable.600. optical inspection systems could be used to automatically : 1) reject glassware with large defects.000)/($1. 24. Installation of the equipment can also be performed by technicians from the equipment vendors. This could provide additional savings by reducing the manual labor required for inspecting. Estimates of implementation costs were obtained from equipment manufacturers. According to data obtained from the quality assurance department. 11 12 Supermatic Package Machinery Inc. The simple payback period would be: Payback = (Imp Cost)/(Cost Savings) = ($1.4 yrs (17 months) Automatic inspection/rejection methods should also be considered when designing the new packaging and conveyor system. based on descriptions of the existing conditions at this facility. Garvey Corporation. Blue Anchor.432/yr) = 1.. So the installed cost per line will be about $400. By using a conveyor system which takes the rows of glassware exiting the Lehr and removes them in single file lines. Fairfield.000. Installed cost of a fully adjustable case packer capable of packaging glassware in multiple layers of 12. about 40% of the rejects have large scale defects which would be detectable by optical inspection devices. requiring manual inspections only for detecting small scale defects which can’t be detected automatically. NJ. 36.Manufacturers of case packers11 and conveyor systems12 which are commonly used in the cosmetics industry were contacted. (800)257-8581.109.000 and the total cost for installing the packaging systems on 4 production lines would be about $1. Each company will custom design their machinery to fit a specific customer’s needs and will test their equipment using the customer’s products before shipping the equipment to the customer.000. 86 .600. or 2) for the products with lower quality requirements. or 48 bottles per layer was estimated to be about $350. NJ. (201)575-6350.000.
Once the product is finished by machine B.690 Simple Payback Period = 0. When both machines are operating at full capacity. The semi-finished products remain in this area until worker 3 transports them to machine B where they are loaded into the machine by worker 3. Machine B then finishes the product and packages it for sale. The linkage would consist of a magazine between the two machines that would automatically shut down the first machine when the storage area in the magazine exceeded 100 light bulbs and automatically turn it back on when there are only ten light bulbs left in the magazine. Estimated Implementation Cost = $14. machine A is periodically shut down while machine B reduces excess inventory. an excess of unfinished inventory is created by machine A. This machine then takes the materials needed to assemble the mouthpiece of the light bulb and attaches the mouth piece to the light housing.704 /yr. 13 Install Magazine Between Machines to Reduce Costs Assessment Recommendation Summary Estimated Cost Savings = $211.2 units/minute. The bulbs are taken to the storage room because machine A has a higher output rate than machine B and an overflow supply of bulbs will begin to develop between the two machines. Presently.Assessment Recommendation No. For this reason. The output from machine A is then stocked on pallets and transferred to a temporary storage area by worker 2. The production line is in operation for about 4992 hrs / year and machine B is in operation for all of this time. Recommended Action Replace the present process of transporting the light bulbs from machine A to the storage area and back to machine B by linking the two machines together. Machine A is in operation for about 95% of the production operation time (based on interviews and observations). Machine A can operate at an output level of 5. The installation of the magazine will reduce labor 87 .07 years (less than one month) Existing Practice and Observation Presently the process of assembling light bulbs is performed by four workers and two machines. This will compensate for the different production rates of the two pieces of machinery. The first step in the assembly of the light bulbs is feeding the materials into machine A by worker number 1. the fourth worker transfers the light bulbs to the pallets and takes the pallets to the finished product storage area. about 5% of the bulbs received by Machine B are defective.72 units/minute and machine B can operate at 5.
Workers estimated that less that one percent of the light bulbs produced by machine A are defective. 4992 hrs/yr. There will also be no more need for the temporary storage area that was previously required to house unfinished bulbs. $0. The annual savings from reduction of defects.NDR) where UPY = units produced per year.388 /yr.560. is the reduction of two workers that are needed to work the production line.MPLA) x HRS x CPH where HRS = annual hours of operation. $19. 4 MPLA = workers per line after implementation. Then that at least 80% of the defects come from either the transportation process or removing the bulbs from the machine. ADS. Anticipated Savings The annual reduction of man hours savings.) x ($19.47 /hr) AMHS = $194. is the savings seen from the decrease of the defect rate from the estimated present amount of 5% to about 2%.47 MPLB = workers per line before implementation. 2% CPU = average value per unit (bulb). 1.2) x (4992 hrs/yr. AMHS = (MPLB . This is possible due to the replacement of the 4% defects rate caused by the intermediate transportation with an estimated 1% defect rate caused by the magazine.000 bulbs ODR = old defect rate. AMHS. 2 AMHS = (4 . the defects which occurred from the extra packing and transportation of the bulbs will be reduced. ADS = UPY x CPU x (ODR .requirements of this operation by eliminating the need for the two workers who are presently required to transport the light bulbs between machines. 5% NDR = new defect rate.37 88 . In addition. freeing that area for other uses. CPH = cost per hour for workers (including fringe).
ADS = (1. The existing transportation of bulbs to the storage area and back requires equipment that needs to be fueled and maintained daily. and installation of the magazine. ACS.05 .704 Payback Period = 0.704 /yr. This equipment will no longer be required.316 /yr. The simple payback period can be calculated with the following equation: Payback Period = Implementation cost / ACS = $14.07 years ( less than one month ) 89 .316 /yr.388 /yr.37/bulb ) x (0. ACS = AMHS + ADS ACS = $194.690 / $211. Implementation Implementation requires the design. The installation of the magazine will require two steps: the arrangement of the machinery and the connection of the magazine.0. and can be calculated with the following equation. and the respective costs are estimated as $3340 and $2350. It should also be noted that there will be additional indeterminable savings from the reduction in transportation costs and reduction of storage space that is required. The total annual cost savings. construction. is then due to the sum of the reduction of man hours savings and the reduction of defects savings. or may be used for other purposes.000 bulbs/yr. Hence the total installed cost would be $14.+ $17.560. ACS = $211. The design and construction of the magazine can be contracted to a conveyor manufacturer company and will cost approximately $9.690.000.) x ($0.02) ADS = $17.
Recommended Action Cross train all the employees in different aspects of the manufacturing process so there is always somebody available with the skills necessary to keep the production running. The product is expensively priced. when somebody takes a sick day or other leave of absence there is enough work to be finished that it doesn't cause any problems. We propose that the company provides this training of employees on a regular basis to keep all the operators up to date all the time. However.000 Simple Payback Period = 0. The production is not fully automated and depends on skills of different operators or craftsmen. The sales are about $17. Existing Practice and Observation The company cannot satisfy all demands of the market. there are days (on the average 5 a year.42 years (about 5 months) Background The company is a manufacturer of luxury light fixtures. thus without any loss to production but with pay to the employees. reflection of occasional slower production caused by the lack of trained personnel is calculated into this number) when the production has to be diverted into auxiliary work or workers are asked to go home because the key employee is missing and the job cannot be finished. There is only one shift operation at this time and because of special high level skills required the company is not successful in finding people for a possible second shift. Normally.Assessment Recommendation No. We assume that the training can be accomplished in after work hours.000. Rotation of the operators should be established as a practice.000/year Estimated Implementation Cost = $10. 14 Cross-Train Existing Personnel to Avoid Lost Time Assessment Recommendation Summary Estimated Cost Savings = $24. Discussions with the supervisor revealed that the company looses approximately 5 work days every year when employees are absent due to sick leaves or other reasons. 90 . The sale volume is not very high relative to sales in dollars because the company caters to a niche market. There is a constant backlog on received orders because the lamps are not produced fast enough.000.
000/year Implementation There is very little cost associated with the original planning and scheduling of the training.00/hr (For the purpose of this calculation we consider $50.000/day Labor Rate = $50.) People Involved = 13 Annual Time Allocated for Training = 1 week Number of Operators to Be Trained = 10 Cost of Training = (13 people) x (40 hours) x ($50.00/hr) x (1. we believe that it is very conservative number. since that is the direct cost to the company.000) = 0.Anticipated Savings Realized Profit = $10.000. If we estimate the total cost of such activity as $10.4 fringe benefit) = $70.000/yr) = $24.42 years = (approximately 5 months) 91 .00/hr rate.00/hr) = $26.000/day) x (5 days)] .000 Simple Payback = ($10.000) / ($24.00/hr Cost to the Company = ($50. Implementation Cost = $10. Fringe benefits will be paid regardless.($26.000/yr ES = [($10.
CONCEPTS FOR PRODUCTIVITY ENHANCEMENT Part II Decreasing Cost/Piece 93 .
In one day assessment it would be extremely difficult to be able to collect all the data required for detailed calculation of optimum batch sizes. keep the work load more or less constant. In painting operations it is typically cleaning of the paint guns. it can free up precious resources of the company. Better sequencing of runs from light to dark color can eliminate cleaning operations during color changes. steps like that involve hiring more people and thus are a considerable expense to the company. A case like that calls for either speeding up the whole production. we feel it is a step in the right direction. Since the lighter colors are effected by the darker ones to a large degree. The illustration of this concept is documented by the "Machine Shop Scheduling" case study. We can use as an example painting or printing operations. What we would like to address here is something which can be done in one day visit.Scheduling Introduction Scheduling we want to introduce is not a scientific discipline studied by industrial engineers. and deliver parts quickly to their destination. however. While scheduling production runs in order to keep a constant throughput is a complicated matter beyond the scope of a one day assessment. the cleaning operations must be performed very thoroughly and their partial elimination would lead to significant savings. Of course. the basic ideas related to scheduling in a JIT environment can be evaluated and conveyed by an assessor within the time frame given. and so on. If performed in all sequential operations for one part or product. sequencing of operations. 94 . The calculations involved also demand more time to process and in most cases extensive computer programming is a significant part of such undertakings as well. The purpose of scheduling of all production runs is to produce parts as cheaply as possible. which might be quite beyond a scope of one day audit. in printing houses it would be cleaning of cylinder blankets or spray jets. Scheduling and Just-in-time are closely related. The first type of scheduling recommendations could involve better planning in cases when changeover of certain types are involved. As the second example of schedule changes within production we can introduce a concept of elimination of waiting for batches of products. if the potential profit justifies the expansion. or adding a new work shift for achieving the desired output per day. It would usually involve cases in which the company knows that the market for their product exists. In some cases the reorganization of work schedules could be helpful.
To make useful and quick analysis of a process it is possible to use ratio analysis. At the shorter ratio each actual job processing takes the same amount of time as before. 95 . If we are talking about two operations within the process. We will illustrate the concept using the case from the machine shop. The lot consists of 10 000 parts which have to be extruded. The ratio is 10:1 and indicates that a better scheduling of jobs is necessary. This example also shows that there is not a magic easy way to classify the problems of productivity since the same example could be used in the "Floor Layout" section. breaks. the lead time could be shortened to the time necessary for the process. ninety lots are idle waiting their turn while only ten are worked on. If the average job takes five weeks when the ratio is 10:1. The second ratio is speed of the process to sales rate. The first ratio is production lead time to work content.Just-in-time is usually associated with lead times for a manufactured product. As an illustration we can use an example from a plastic parts manufacturer. After extrusion there is a trimming operation. we have to wait only the time which is necessary to produce that one part. The third ratio is number of pieces to number of work stations or operators in a line segment. instead of the sales rate of the finished final product. That would mean only two job lots per machinist. If the trimming machine is moved to a physical proximity of the extrusion machine. In other words. This ratio can also be used to analyze office work. There are one hundred different lots to be processed and ten machinists to do the job. which also includes setup times. This is not an average output rate. we can consider a component at the next manufacturing operation. Consequently. JIT can be applied in between different production steps. at the most in hours. Trimming takes just three seconds but because of the lot arrangement it takes almost eight and a half hours before the last part is trimmed. Sometimes the lead times are in weeks. then our target ratios are the times that these two processes take. the ideal ratio is 1:1. Of course. That is ideal and for practical purposes we would be satisfied with ratios in single digits. If we extend the concept. but the actual time when the part is worked on can be counted in minutes. Every idle piece. or. every pallet with parts waiting or being delivered long distances raises this ratio. in other words to get the part. But we can see quite commonly ratios of 1:100. At this point the close relationship to traditional scheduling of production runs becomes obvious. The ratio applies to a single part only. the lead time for the next operation is just that long. down time. even 1:1000. but waiting time is cut five times. etc. the average would be only one week if the ratio were shortened to 2:1..
• Identify processes or operations which you feel are more costly than they should be. Push systems (speculative production. number of shifts. The reduction might not be possible if the process cannot be modified or replaced with equally satisfying treatment but shorter in duration. On the other hand. That is not to say that we perceive such a change as trivial. where long times involve annealing. where items are pushed through production) are most likely inefficient. What would be the right sequencing to eliminate these operations? • Do you have large size batch operations? • What are typical leading times for your products? ("product" could also be object for the next operation) • What is the company's operating schedule (including vacations. the ratio gives us a hint of where a significant potential for a reduction in time for the manufacture of a painted part exists. However. Questions to Ask • Do you have operations where different sequencing of job would eliminate some nonvalue added operations. why? • Does your product experience multiple handling or multiple inspections? Symptoms/Indicators Excess inventory and especially in-process inventory are good indicators that it should be possible to reduce both by better scheduling. Related ARs • OPTIMIZE LOT SIZES TO MINIMIZE INVENTORY CARRYING COSTS • SCHEDULING PRODUCTION RUNS TO MINIMIZE SET-UP TIMES • ADD A SECOND PRODUCTION SHIFT 96 . such as cleaning. poor floor layout. or both. there is obviously an opportunity to shorten the bake time. identify these operations. or exposure for a specific time to a specific substance. The ratio differences with and without baking are enormous. A good example could be baking of enamel paints. melting. During those times the piece is only indirectly worked on and the lead time is long. The companies should be concentrating on using a pull system (production is based on orders received). overtime)? • Ask questions about ratio indicators.There are specific manufacturing processes. setups etc. • Do you use push or pull system in your manufacturing process? • If overhead cost is too high. A lot of movement of parts using fork lifts is an indication of either bad scheduling.? If the answer is YES.
but the real machining time is only twelve. 480 minutes represents one shift and we certainly can say also one banking day. From that we see that the waiting time of 480 minutes is valid for all the gears.Assessment Recommendation No. The company also makes other gear sets which are sold to different gear box manufacturers but also as individual units from a catalogue.500. It takes twelve minutes to drill and bore each gear.524/year Estimated Implementation Cost = None Simple Payback Period = Immediate Background The machine shop performs all machining operations for steel pinion gears.000. Since the boring of the gear takes twelve minutes. The shop processes forty gears per lot. based on the size. which totals eight hours. too. The sales of the company are $27. but on the average it is estimated to be $11. it. one shift. had to wait forty minutes for twelve minutes of machining. he can pick up the next gear from the previous operation and have it ready when the gear on the machine is finished. 15 Optimize Lot Sizes to Reduce Inventory Carrying Costs Assessment Recommendation Summary Estimated Cost Savings = $61. The company then sells the gears to A gear box manufacturer. On the average the company processes 370 lots of gears per year.000. Recommended Action The recommended action is based on the idea that in-process inventory costs the company money. The value of these forty gears varies. Existing Practice and Observation The company has a one week lead time for any size gear manufactured. The lead time for the fortieth gear is apparently 480 minutes. This way the batch operation is completely eliminated. to process all forty. 97 . and the operator does not have to attend the machine during those twelve minutes. The manufacturing of one gear consists of a hobbing operation from raw material and then drilling and boring operation for the bore. Since the gear which is machined right now was at one point the fortieth in the waiting line.
. making rework necessary for just one piece instead of many. Another benefit of this approach is that each piece is inspected individually and not as a part of a batch. changes in layouts of the plant.000 batch is around the whole year as in-process inventory which costs the company at least the money lost to other investments. the savings generated will be significant. it is important to realize that the recommendation deals only with one case of in-process inventory.000/yr) x (0.1) ES = $1.000 Since the company processes 370 lots a year and 480 minutes represent one day in terms of banking hours. the corrective action can be taken immediately. On the other hand if all steps of all operations are looked at and approached in a similar fashion. If we consider a conservative rate of return for the company to be 10%.Anticipated Savings Value of the batch = $11. 98 . an $11. Simple Payback = Immediate Conclusion Although the savings are not too much in this case.100/year Implementation There is not a direct implementation cost. The requirement is just to change the routine of the operator. which was the most obvious and did not require any investment. etc. the loss is: ES = (Inventory) x (Rate of Return) ES = ($11. should a problem occur. Therefore.
99 . Recommended Action The recommended course of action is to add a second operating shift to the production in order to meet the excessive demand and maximize profits. Estimated Implementation Cost = $9. The operation of a second shift will allow the company to decrease the cost per product which can increase the profit per product or allow the product to be sold by the company at a lower price to gain a larger share of the market. This will allow the overall percentage of the non-production related expenses to decrease on a per mirror basis.690/yr.Assessment Recommendation No. The manufacture has not been able to meet the excessive demand for his product while operating only one shift. The manufacturing process begins by cutting the mirrors into the desired shapes and sizes. The fixed cost that had is being absorbed by the production of only one shift will now be able to be split up between the to shifts. At this point the mirrors are either framed or decorated by a variety of methods. After production is complete the products are then packed and shipped directly to the customers. The majority of workers are bussed in by the company from a neighboring city which as an abundant supply of men and women willing to work for minimum wages. 16 Add a Second Production Shift Assessment Recommendation Summary Estimated Cost Savings = $445. One concern of management was the ability to maintain an acceptable production rate on the second shift and avoid internal theft while management was not there to watch over the operation. The two main types of decoration that are used on the mirrors is silk screening and attaching pictures or designs to the back of the mirror. There will be extra management hired to supervise the operation on the second shift and additional security measures taken to deter internal theft.107 Simple Payback Period = less than one month Existing Practice and Observation Mirrors are purchased and shipped to the plant in crates with either a polished edge finish or raw edge finish. The majority of the manufacturing process consists of the decoration of the mirrors which has to be performed by hand.
which includes the purchase and installation of a walk through metal detector.00. Implementation The implementation of this assessment will require the addition of a night supervisor to monitor the second shift and the installation of a security system. Payback Period = 0. The night supervisor will be required to be supervise all the operations of the second shift and maintain an acceptable production rate. + $34.) ATS = $445. Only one system will be required at the main entrance because that is the only entrance the employees can use.5 million )( 40% )( 10% ) .860/yr.($59. TAS = total annual sales PVA = percentage of value added to the product APP = annual percentage of profit ASC = annual cost of the night supervisor (including benefits) AGC = annual cost of the security guard (including benefits) Hence the additional profit will be. The premium costs for labor on the second shift were neglected due the amount of available labor.450/yr. ATS.107. can be calculated as the amount of profit generated by a second shift minus the operating costs: ATS = (TAS x PVA x APP) . The security system will be monitored by one security guard.(ASC + AGC) where.02 years (less than one month) 100 . The total implementation cost will be $9.107.690/yr.107 / $445.690/yr.Anticipated Savings The annual total benefit from the extra profit. The security system will cost $9. ATS = ( $13. Payback Period = Implementation cost / ATS = $9.
it may be possible to negotiate with material suppliers to provide their products in premeasured quantities. negotiating delivery methods or schedules which will reduce the in-house costs. if the usage volumes for a raw material are large but deliveries are small and frequent. the most likely recommendations related to purchasing will involve cases where extensive efforts handling purchased goods are observed. If existing delivery schedules require significant floor space and labor efforts for handling raw materials. Finally. For the IAC program. it may be profitable to switch to a just-in-time delivery schedule. paying close attention to any in-house labor efforts associated with handling those materials. it may be beneficial to purchase the materials in bulk to receive volume discounting. and inventory carrying costs. or unpackaging raw materials • Large volumes of raw materials or purchased components in inventory • Labor efforts spent transporting raw materials or purchased components (multiple transportations of raw materials and purchased components occur because purchased goods are not received Just-In-Time) 101 . in-house material handling. If significant labor efforts are spent measuring materials.Purchasing Introduction Improvements in raw material and component purchasing procedures can lead to significantly reduced purchasing. raw material and purchased component inventories should be surveyed. it may be possible for the IAC client to work with their suppliers. In this case. allowing a reduction of in-house labor. the bulk discount would have to be greater than the increased carrying costs incurred due to the requirement to house more raw materials at the manufacturing facility at one time. In these cases. During the plant assessment. measuring. Questions to Ask • How often are raw material deliveries received? • Are raw materials delivered based on the supplier’s convenience or planned needs at your facility? • Inventoried quantities and values of raw materials? • How long do raw materials or purchased components remain at your facility before they are used? Symptoms/Indicators • Large amounts of time/labor spent mixing.
Related ARs • RECEIVE RAW MATERIALS OR PURCHASED COMPONENTS ON A JUST-INTIME BASIS TO REDUCE INVENTORY CARRYING COSTS • RECEIVE RAW MATERIALS OR PURCHASED COMPONENTS ON A JUST-INTIME BASIS TO REDUCE MATERIAL HANDLING COSTS • ORDER RAW MATERIALS IN CUSTOMIZED PACKAGING TO REDUCE INHOUSE MIXING OR MATERIAL HANDLING COSTS • PURCHASE RAW MATERIALS IN BULK QUANTITIES TO OBTAIN VOLUME DISCOUNTING • SUBCONTRACT WORK TO REDUCE OVERALL COSTS OF PRODUCTION 102 .
If the level of the wood chips gets too low. requiring some of the chips to be removed from the pit. Savings on labor and energy costs will result.768 / yr. This task is performed by a 90 hp blower which forces the chips up through a silo and into a storage shed.Assessment Recommendation No. The wood chips are then moved back into the pit by an operator with a front-end loader. This operation requires about 15 hours per week. This will eliminate the present need to have the wood chips moved from the storage pit to the storage shed and back to the storage pit. Estimated Payback Period = Immediate Payback Existing Practice and Observation The plant receives deliveries of wood chips by truck from the vendor according to the vendor’s schedule. creating backups in the delivery schedule. The storage shed can still be used as a buffer so if there are any problems with the shipments the extra wood chips could be used until the deliveries are resumed. the cyclone is unable to pull the chips out of the pit and production must be halted. On average. The level of the wood chips must be kept within a certain range in order to insure that the trucks are able to unload the chips into the pit and the cyclone is able to transport the wood chips into the factory. The chips are kept in the storage shed until the level in the pit is low enough. based on your company’s demand for wood chips. It takes the blower approximately 1. 17 Schedule Wood Chip Deliveries According to Demand Assessment Recommendation Summary Estimated Cost Savings = $28. 103 . When the storage pit becomes over-filled the trucks that are making the deliveries are unable to unload into the pit.5 hours to remove enough wood chips from the storage pit when it is full. The deliveries of wood chips are often made before the pit is able to accommodate them. Recommended Action Have the supplier deliver the wood chips according to a fixed schedule. this is done three times a day. The wood chips are dumped into the storage pit until the cyclone is ready to pull them out of the pit and transport them into the factory for use in the process.
can be determined using the following equation.75) (. The payback will be immediate.690 / yr.) MHS =$24.5 hr/day) (360 days/yr. ATS = MHS + AES ATS = $24.078 / yr.05 / kWh) AES = $4. needed to move the wood chips from the storage shed to the storage pit can be calculated using the following formula. MHS = HPW x CPO x WPY HPW = number of hours per week spent moving wood chips CPO = cost per hour of the person moving the chips (incl.65 /hr) x ( 52 weeks/ yr.078 / yr. ATS = $28. 104 .690 / yr.768 / yr. fringe) WPY = weeks per year of plant operation MHS = (15 hr/week) x ($31.Anticipated Savings The savings from the reduction in man hours.) ($0. Implementation and Simple Payback Since the supplier is heavily dependent on your business and can be persuaded to begin deliveries according to your schedule. The annual electricity savings. there will be no implementation cost for this recommendation.746 kw/hp) (4. + $4. can be determined as follows: AES = HPR x AEL x HPC x HPD x DPY x CPH HPR = The horse power rating of the blower AEL = The average electric load on the motor HPC = The horse power conversion into kilo watts HPD = The average hours per day the blower operates DPY = days per year of plant operation CPH = cost of electricity usage AES = (90 hp) (. MHS. The annual total savings. AES. ATS.
Additional time is spent cleaning the area that is used for measuring and transporting the materials. Labor costs will be reduced by eliminating the need to weigh out the materials into proper amounts. Anticipated Savings The man hour savings.Assessment Recommendation No. Spillage of the raw materials which occurs during measurement and transportation to the mixers will be eliminated. This will eliminate the need to measure the raw materials in-house. MHS. 18 Purchase Materials from Supplier in Customized Packaging Assessment Recommendation Summary Estimated Cost savings = $24. can be determined using the following equation: MHS = (RMH + TSC x NOE) x AHR x DPY 105 . If the new type of packaging is implemented then the receiving labor requirements could be reduced to two employees. Recommended Action Require the suppliers to package the materials in immediately useful quantities and use soluble packaging. Presently workers are given fifteen minutes to clean themselves off every time they are finished a shift or are taking a scheduled break. There is a team devoted to processing the materials as they arrive and breaking down the packages so the materials can be measured out and sent to the mixers. The company estimates that approximately two percent of the raw materials are wasted in the combination of processes that are necessary before the materials are placed in the mixers. Savings of several types will result. There are presently three employees working in receiving and a large percentage of their time is spent handling the raw materials. Once the materials are separated into the proper amounts they are all combined in the mixers. Estimated Payback Period = Immediate Existing Practice and Observation Your company presently receives materials from suppliers in standard amounts and divides the materials into useful quantities so the ingredients can be combined to form the right compounds for the process. allowing the pre-measured packages to be removed from the shipping containers and directly added into the mixers. The soluble packaging will dissolve once the reactions in the mixers begin to take place.945/yr.
945 / yr.SWM) AMC = The total annual cost for raw materials PCP = The premium percentage paid for packaging SWM = The percentage savings of material wasted OCI = $1.($43. will be: ATS = MHS .000/yr. OCI. no implementation costs will be associated with this recommendation. The annual total savings. 106 . A premium of 5% will need to be paid to the supplier in order to have the materials packaged as requested. This will be slightly off-set by the 2% reduction in the amount of wasted materials achieved by using the customized packages.) . There will be an annual increase in operating cost.445/yr. the payback will be immediate. Once implemented.445 / yr. Implementation Aside from the cost premium for the customized packaging. which must be considered with the cost savings.500 / yr.) MHS = $68.OCI ATS = ($68.25/hr) x (260 day/yr.2%) OCI = $43.5 hrs/day x 2 employees) x ($29.) ATS = $24.450. The net annual increase in the raw material cost will be: OCI = AMC x (PCP . ATS. x (5% .RMH = reduced man-hours per day TSC = time the employees are given to clean materials off per day NOE = number of employees who work with materials AHR = hourly rate for employees in receiving (including fringe) DPY = number of days per year the operation runs MHS = (8 hrs/day + 0.500 / yr.
The company also leases a remote warehouse for storage of raw materials and finished goods. ft. This translates into about $14. the gaylords are transported to the raw materials processing area by means of a forklift. and will also reduce the warehousing costs associated with these raw materials.082/yr Estimated Implementation Cost = $100. Gaylords are temporarily stored in the remote warehouse. Therefore. The cost of the warehouse is $0. then loaded into the material hoppers. There will only need to be one delivery to the silo every month. then delivered to the production facility. and remove the contents of a gaylord. 19 Install Polystyrene Pellet Storage Silo and Receive Bulk Delivery Discount Assessment Recommendation Summary Estimated Cost Savings = $175.000/yr plus 35% for fringes). per month.Assessment Recommendation No. The gaylords are stacked 3 high and are at 16 sq. At the production facility.ft. open. 1050 hours are spent in the handling of the gaylords. Approximately nine gaylords are used per day. The total warehouse space needed is 480 sq. The rent paid every year for this amount of warehouse space is $1. Anticipated Savings An average of nine gaylords are used per day.23/sq. Recommended Action The recommended action is to install an adjacent outdoor silo to store the polystyrene pellets.50/hr (based on $20. three hours are spent handling the gaylords. This will greatly reduce the present polystyrene purchase and handling costs. When using nine gaylords per day. 107 . allowing bulk delivery discounts to be obtained.175 per year in labor costs. aerated. It takes approximately twenty minutes to transport. At any given time the company has about 90 gaylords stored in the warehouse.325. per skid. assuming a labor rate of $13. the company receives their raw polystyrene pellets in gaylords. The company runs on a 350 day per year work cycle.6 years (7 months) Existing Practice and Observation Currently.000 Simple Payback Period = 0.ft.
Polystyrenics Div. or $100.418 = $175.500 per month or $162. This would mean that the company would receive only one delivery of material per month via tanker truck.175/yr + $162. Universal Dynamics Inc.. A silo this size can hold 100.000 lbs. These operation costs (OC) would be subtracted from the cost savings. 5 6 Monsato Corp. It is $0.. Net Cost Savings = CS . of material.500/yr Implementation It is recommended that two 12 ft. the cost savings per year (CS) can be estimated as: CS = WS + LC + TC where.OC = $177.000 per year. to transport by way of tanker truck.500/yr .. Each gaylord is 1000 lbs.418 per year. the total cost savings will pay for the implementation costs in approximately 7 months. diameter by 60 ft. the savings in transportation were $13. Operation cost for the silos will be approximately 10% of the previous labor cost. WC = Warehouse Cost LC = Labor Cost TC = Transportation Cost CS = $1.There is also the added benefit of a lower price for the transportation via bulk tanker trucks as opposed to transport with gaylords as a medium. or $1.000/yr CS = $177.0006 per silo.000 total..$2.325/yr + $14.05 cheaper per lb. NJ 108 . and installation is $50. A nominal value of $1.082/yr Therefore. About 270 gaylords were used per month.000/yr is estimated for silo maintenance. and at $0. The cost for all parts.05 5 less per lb. high silos be installed. Therefore.
As rule of thumb we can estimate this to be about 40% if the company can't provide a better number. It is best for our purposes to keep the two separate and look for reductions of direct labor charges or indirect burden charges and calculate the savings separately.” we would like to know the fringe costs of labor. etc. Some parts of overhead vary with production rates and some do not. e. a product is charged $3.) . clerical employees. 109 . profit sharing. and shipping. In order to properly judge the savings involved in "downsizing. maintenance • Taxes. if the burden rate is 300%. inspectors. etc. water. and management) and marketing. crane operators. • Factory overhead costs • General administrative and marketing costs • Profit In cost accounting the overhead is frequently everything mentioned above except direct labor and profit. rentals. • Utilities (heat. The rate is usually predetermined by the accountants. light. It does not follow that if one of two alternative new machines involves $50. This is why it is difficult to assign a truly accurate value of burden to each item produced.g. retirement plans. The most common are burden and overhead.000 less indirect manufacturing expense.00 for every dollar of direct labor cost. etc.000 less in direct labor cost than the other it will also involve $150. receiving. Keep in mind that the employer must match the employees contribution to social security and Medicare and may pay for vacation time. • Purchasing. and depreciation • Administration(sales. medical insurance.Burden Analysis Introduction Indirect expense of a manufacturing organization is called by various short names. insurance. A wide variety of items are included and could be made up of the sum of: • Salaries and wages of foremen. The selling price of a widget could be broken down into the sum of: • Direct cost of labor and material. technical.
as first reduction of energy consumption and more recently reduction of waste generation are direct reductions of burden.) RENT OUT UNUSED SPACE B.) AVOID CONSTRUCTION COSTS 110 . Questions to Ask • Is new construction planned? How much and why? • Do you manufacture or store goods in any other building nearby? • Would you be able or want to have a rent paying tenant occupying any portion of your building complex. AND UTILITY COST • FREE UP SPACE IN BUILDING TO: A. INSURANCE. Part of our increased agenda is to look at those parts of burden which we have hitherto ignored but which might very well constitute the difference between an organization making a profit and one headed for bankruptcy and shut down. or demolish dilapidated facilities) Symptoms/Indicators • Large unused areas on the factory floor • Using two nearby buildings • Empty or unused buildings on the property • Large equipment "graveyards" on the property Related ARs • REDUCE COST OF BUILDING PROPERTY • COMBINE FACILITIES INTO ONE AND ELIMINATE ASSOCIATED COSTS WITH THE BUILDING WHICH HAS BEEN ABANDONED • TEAR DOWN BUILDING ON PROPERTY TO REDUCE TAXES. • Do you place any value on equipment or facilities which seem to be "junk"? (If not.We have obviously been involved in calculating reductions in burden since the inception of the EADC program. it may be economic to scrap junk and use the freed space.
Anticipated Benefits The total annual savings of rent. There is a significant number of personnel that must commute between the two locations on an every day basis. This will relieve some of the burden on the company by eliminating the second building's expenses as well as save in the time that is lost in the commute between the two locations.697/yr.000 ft2 building. warehousing and. ARS = TAR x ARR where. Recommended Action The recommended course of action is to create room in the main location and move the operations from the auxiliary building into the main building. fifteen minutes. on average.Assessment Recommendation No.53 year (6 months) Existing Practice and Observation The daily operation of the company are divided into two stages that are performed in two separate manufacturing locations. will be the reduction in rent that the company will need to pay because of the termination of the 15. The locations are approximately three miles apart and the travel time between them is. ARS. This area is mainly used to store excess inventory and out of date products. The auxiliary location is approximately one fourth the size of the main location and is only used for manufacturing. some of manufacturing. In addition it takes time to have products transported between locations. 111 . There is a large portion of the main building that is not being used efficiently.497 Simple Payback Period = 0. Estimated Implementation Cost = $65. 20 Condense Operation Into One Building Assessment Recommendation Summary Estimated Cost Savings = $123. There is a significant amount of space in the main building that is being under-utilized and is believed to be able to be reorganized and moved to the main storage area. The main location houses the offices.
65 /hr)(2 trips/day)(312 days/year) AMS = $26. AMS = (0. AMS = TTC x NPC x HRC x TYC x DWY where. ARS = 15. TTC = time it takes to commute NPC = number of people that have to commute HRC = average hourly rate for the people commuting TYC = number of times a day to make trip DWY = number of days worked per year hence the savings from commuting is.10 /ft2 / yr. would be from the elimination of trucking costs that are presently necessary to transport the unfinished products from the main location to the second building and back again to the main location.500 / yr.TAR = total area rented ARR = area rental rate hence the savings from rental is. AST = CPT x TPD x DPY where. The annual savings of man hours. AMS. CPT = cost per trip for truck TPD = trips per day that are made DPY = days per year that trucks run 112 . ARS = $76.917 / year The annual trucking savings.25hrs/trip)(7 workers)($24. can be contributed to the elimination of the need to commute between the two locations is estimated as.000 ft 2 x $5. AST.
are : ATS = ARS + AMS + AST ATS = ($76.230. The production will be shut down for one week in order to make the necessary movements from the auxiliary warehouse to the main warehouse.697/yr.) ATS = $123. There will be one hundred man-hours allotted at a rate of $36.) Payback Period = 0.497. The total implementation cost for the recommendation will be $65. To reorganize the storage areas the use of in-house personnel will be utilized and will require overtime pay.97/hr to produce an organization cost of $3697. six months) 113 .280/yr. The annual total savings. It should be noted that if the move is scheduled then it might be possible to have the employees take one week of their vacation during this period to avoid additional down time. Implementation The Implementation will require moving of all the essentials from the auxiliary building to the main building as well as the reorganization of the main building's storage areas.500/yr.00/trip)(1 trip/day)(312 days/ yr.280 / yr. The lost production will cost approximately one week of the total annual sales which amounts to $44.) + ($20. Payback Period = (implementation cost)/ ATS = ($65. There will also be a production down time that needs to be accounted for.917/yr.hence the savings from trucking are.53 years ( approx.) + ($26.300. ATS. AST = ($65. A moving company will be contracted to move the operations from the auxiliary building to the main building.497 ) / ($123. There will be twenty-two pieces of machinery ranging from three tons to two hundred pounds that will need to be moved at a total cost of $17.) AST = $20.697/yr.
In demolishing the building the annual taxes and insurance for the building will be eliminated.C. The building is assessed as a development property and the last reassessment was performed before the building began to deteriorate. D. Anticipated Savings The annual savings from the elimination of the taxes.000 Simple Payback Period = 2. Washington.2 years (26 months) Existing Practice and Observation The company has several buildings that have been constructed since the original factory was established. AST = TPA x TAD where.Society of Industrial and Office Realors.Assessment Recommendation No.600/yr Estimated Implementation = $118. The additions were made to the original plant to accommodate expanded production and increase the available storage space. for the building that will be demolished can be determined using. AST. There is one building that is no longer of any real use and is at the point were repairs will cost more than the building is worth. 131996 Comparative Statistics of Industrail and Office Real Estate Markets. 21 Demolish Building to Reduce Tax & Insurance Fees Assessment Recommendation Summary Estimated Cost Savings = $54. TPA = The tax rate per area13 TAD = The total area being demolished Hence the savings from taxes are. Recommended Action The recommended action is to demolish the 1948 warehouse and move anything of value to either of the adjacent warehouses that are at less than maximum capacity. The construction quality of the additions is not that of the main building and in recent years some of the additions have been neglected due to their diminishing requirements. 114 .
AIS = ( $0. The disposal of the material consists of dump charges that is determined by the type of material and the volume (cubic yards) being disposed. The demolition also includes the loading and hauling of the rubbish hence. $0. this is the amount of insurance that is being paid to keep fire and liability insurance on the building. and the cost for the type of building (steel framed).) x ( 30.000.000 ft2 ) AST = $51. the demolition of the building will cost approximately $90. The annual savings from the insurance.000 per year The annual total savings. ATS = AST + AIS ATS = ( $51. The demolition costs are determined by the volume of the building. It is estimated that there will 14Based on information obtained from Comparative Statistics of Industrail and Office Real Estate Markets Repair and Remodeling Cost Data 15th Annual Edition.S. AIS = IRA x TAD where. R. ) x ( 30. Any salvage value of material will be incorporated into the cost of the disposal of the material. It can be determined using.600 / yr ) + ( $3000 / yr ) ATS = $54.10 / ft2 /yr. AIS. MA 15Means 115 .21 ft3 .600 / yr. 360. IRA = The insurance rate per square foot14 TAD = The total area being demolished Hence the savings from the insurance is.000 ft2 ) AIS = $3.000 ft 3 . Construction Company.AST = ($1. 15. and removal and disposal of the construction materials.600 / yr Implementation The implementation requires demolishing the warehouse. is the savings per year from the demolition of the building and is comprised of the savings from taxes and the savings from insurance. Kingston.72 /ft2 /yr. ATS.
The total dump charges will be $28.000. Payback Period = Implementation cost / ATS = ( $118.00 per cubic yard16.600/yr ) Payback Period = 2.000 resulting in an implementation cost of $118.be 800 yd3 of material that needs to be dumped at a rate of $35.2 years ( 26 months) 16Based on information obtianed from the Means repair and remodeling cost data 116 .000 ) / ( $54.
it is desirable to minimize inventories of all types. Once the root cause for excess inventories is identified and addressed. it is easy to recognize that each of the costs will continue to grow in time. For this reason. the most notable of which are: • Investment costs (time value of money tied up in inventoried goods) • Cost of product damage or spoilage • Cost of product obsolescence • Cost of storage space • Handling & transportation (in-house) Although the magnitudes of each of the above costs may vary from one manufacturer to the next. if inventoried periods are long enough. needed to compensate for deficiencies in the manufacturing process such as: • Long set-up times • Frequent machine breakdowns • Lack of predictive/preventive maintenance • Excessive manufacturing lead times (due to process bottle-necks or poor process layout) • Defective raw materials or purchased components The most important reason to consider inventory levels may be for use as an indicator of other. The Japanese believe that inventory is one of the greatest forms of waste and make every effort to achieve production systems which don’t require it. In fact.Inventory Introduction There are four major types of inventory in industrial facilities: • Raw materials • Purchased components • Work-in-progress • Finished goods Associated with each of the above types of inventoried goods are carrying costs . 117 . the carrying costs can exceed the profits gained from the eventual sale of the products and a net loss will result. This is in contrast to many traditional American and European production systems which have viewed inventory as a necessary evil. process-related problems which should be investigated further (listed above).
and iii) to only produce finished goods in the amount that they are immediately needed. very large raw material volumes are normally required (to minimize transportation costs) and suppliers must be able to reliably deliver all needed materials upon short notice (or raw material needs must be well known in advance of the delivery date). In many cases. product type. Finally. if long set-up times are identified as the cause of large finished-goods inventories in a manufacturing facility and a recommendation is made which will reduce the set-up times significantly. many factors (production volumes. Obviously. the principals and importance of inventory reduction should be recognized and pursued in all practical opportunities.) aside from inventory levels affect the practicality of all three of the above mentioned concepts.to medium-sized manufacturers served through the IAC program. This may result in the storage of large supplies of finished goods to ensure timely deliveries and customer satisfaction. supplier scheduling. To be economical. For most of the small. Minimal raw material inventories are achieved by requiring material suppliers to provide Just-In-Time deliveries. Where inventory levels are found to be excessive. Such investigations may lead to 118 . and ii) reduced inventory carrying costs. the annual savings could consist of: i) reduced production downtime.reducing inventory carrying costs may be shown as a secondary benefit for solving the original problem. order lead time. For example. ii) to have zero in-process inventory. this will be an unattainable goal because they may lack the buying power and production volumes necessary to achieve such a system. product variety. In terms of minimizing inventory carrying costs. Zero (or minimized) in-process inventories may be achieved through the use of continuous processing systems. seasonality of production. etc. the reasons for the manufacturer’s perceived need for large inventories should be investigated. where the product flows continuously from one process to the next until completion. Large-scale manufacturers have the power to dictate just-in-time deliveries by their suppliers and the resources to realistically consider continuous processing methods and just-in-time manufacturing. finished goods inventories can be nearly eliminated by using a Just-In-Time production system--scheduling production lots based on the immediately required orders. Even though the size of the manufacturers served by the IAC program may limit the extent to which inventories can be realistically reduced. the ideal inventory situation is: i) to stock only the raw materials and purchased components which are immediately needed. manufacturers served by the IAC program will be on the “receiving end” of just-in-time mandates and will be required to provide just-in-time deliveries to their customers.
shorten set-up times. what are the present average manufacturing lead times for the products whose inefficient production requires the maintaining of excess inventory? Symptoms/Indicators • Physical observation of large inventories • Long set-up times • Frequent equipment downtime • High defect rates • Lack of a preventive maintenance program Related ARs • MINIMIZE INVENTORY TO REDUCE INVENTORY CARRYING COSTS • MINIMIZE INVENTORY AND OVERPRODUCTION TO REDUCE INVENTORY “SPOILAGE” • REGAIN PARTIAL VALUE OF INVENTORY BY RECYCLING OR SELLING AS SCRAP NOTE: Inventory reductions and the resulting reduced carrying costs should be considered as a secondary benefit achieved by reducing set-up times or machine breakdowns. reducing/eliminating process bottlenecks. modify floor layouts to reduce production lead times. buy new equipment.recommendations to: reduce process bottlenecks. improving maintenance practices. 119 . etc. etc. finished goods)? • How much floor space is used for each type of inventory? What is the assigned value (if any) of that floor space ($/ft2/yr)? • If it is determined that there is excess inventory of some type. reducing overproduction. Questions to Ask • Average value and quantity of each type of inventory (raw materials. develop standardized procedures. purchased components. in-process products. why is that excess inventory needed? • If excess inventories are needed because of some process-related inefficiency or problem. improve maintenance or establish predictive maintenance procedures. improving floor layout.
838 lb. however. all of the products are not sold. It is estimated that your company has the equivalent of one month's production in stock.Assessment Recommendation No.968/yr Estimated Implementation Cost = $9.4 years (5 months) Existing Practice and Observation During our assessment.593 MMBtu Estimated Energy Cost Savings = $5. Boxes containing products as old as 8 years were found. Often. about one-quarter of the finished goods in the warehouse are out-of-date.284 Total Estimated One-time Cost Savings = $19.027 Continued Savings: Capital Investment Savings = $2.640 Simple Payback Period = 0. Due to the long production line set-up times. or has become misplaced due to improper packaging which occurred when batch quantities were over-produced. damaged.743 Estimated Raw Material Savings = 1. damaged.854/yr Cost Benefit from Reclaimed Floor Space = $21. or has been damaged. Estimated Raw Material Cost Savings = $13.114/yr Total Estimated Continued Cost Savings = $23. or otherwise “spoiled. Since there has been no established procedure for purging the inventory of out-of-date products.” Much of this stock appears to have been grouped together when the newer inventory system was 120 . 22 Eliminate Old Stock and Modify Inventory Control Assessment Recommendation Summary One-time Savings: Estimated Energy Usage Savings = 1. it was noticed that a large amount of the existing inventory is very old.459. According to our observations and conversations with facility personnel. glassware is often produced in lots much larger than the existing order with the hope that the customer will order another shipment of the same product in the future. these items have accumulated over the years and now occupy a significant amount of warehousing space. Interviews with plant management revealed that a significant percentage of the existing inventory is not sellable because it is either out-of-date.
= out dated stock = good stock AR#22. Figure #1: Outdated Inventory in Newer Warehouse 121 .
702. The previous actions will result in approximately 9.000 ft2 of cleared floor space which should be either: 1) leased to an outside organization to provide a new source of revenue. and instituting new accounting methods for the inventory in the newer warehouse. Currently.)/12 = 5. 18 17 18 National Cleaner Production Database Office of Technology Assessment. Using cullet to produce glass allows the avoided use of new raw materials. energy savings will also result--about 1. it should be used as cullet (clear glass) or sold as scrap (colored glass). resulting in a cost savings on raw material purchases--it requires 10% more virgin raw materials (by weight) to produce a pound of glass as compared to re-melting cullet. A procedure should be established to identify inventoried products which have become out-dated and have no chance of being sold./ton)]/12 = (63. 1989. Only inventory to be shipped is pulled from rows.implemented. because it requires less heat to melt cullet than it does to make glass from virgin raw materials. but some is also in the newer warehouse (shown in AR#22. leaving out-of-date inventory in entire rows or especially at the back end of rows. inventory is tagged with customer and date and inventoried in "rows" in the warehouse.500 lb. Facing America's Trash: What Next for Municipal Solid Waste 122 .000 lb. Figure 1). Anticipated Savings The existing inventory is estimated as the equivalent of one month’s production: Existing Inventory = (Annual Production) / (12) = [(31. Once the glassware becomes out-dated. Recommended Action Reduce inventory by immediately re-stocking or disposing of old. We estimate that one-quarter of the existing inventory is out-of-date and could be used as cullet. or otherwise “spoiled” inventory.200 BTU per pound of glass produced is conserved by using cullet instead of raw materials. 17 In addition. or 2) used to offset a portion of the construction costs for planned expansions. damaged.308.851 tons) x (2000 lb.
327. x 0.459. or 5.02/MMBtu) Energy Cost Savings = ($3. x 0.593 MMBtu) x (0. + (Energy Savings) x (% Electric) x (Cost of Electricity Usage) = (1.The amount of cullet obtained from out-of-date inventory is estimated as one-quarter of the existing stock.838 lb. + (1.85) x ($2.743 = $19. x 0.65/MMBtu) + .588) + ($2.423 10% soda ash = 1. If one assumes that the existing out-of-date inventories were built up over a period of 8 years.00/ton x 1 ton/2000 lb = $1..378/yr. .15) x ($9.459.459.838 lb. .963 Total Reduction in Raw Material Cost (RM) = $13. .155) Energy Cost Savings = $5. the total one-time cost savings achieved by purging your inventory of out-of-date stock and using it as cullet would be: Total One-time Savings = Raw Material Cost Savings + Energy Cost Savings Total One-time Savings = $13. / 4 = 1.898 15% lime = 1.743 Hence.027)/(8 years) = $2.459.) x (10-6 MMBtu/Btu) Energy Savings = 1.593 MMBtu Since about 15% of the heat for the furnaces is electric heat and 85% is from natural gas. 123 .284 The energy savings would be: Energy Savings = (1. .00/ton x 1 ton/2000 lb = $4.125 lb.838 lb. then the estimated annual savings achieved by re-cycling out-of-date glassware would be about ($19.308. .327.60/ton x 1 ton/2000 lb = $6.125 lb.500 lb.125 lb. the energy cost savings would be: Energy Cost Savings = (Energy Savings) x (% Gas Heat) x (Cost of Gas) + .75 x $12.10 x $68. . .327.027 The above savings is thought of as a one-time savings because improved inventory methods will prevent future build-ups of out-of-date inventories.) x (1200 Btu/lb. cullet) = 1. .284 + $5.838 lb. . cullet) x (1.1 lb.593 MMBtu) x (0. .15 x $13. raw mat’ls/lb. The corresponding cost savings would be: 75% sand = 1. resulting in a raw material savings of: (1.
p..) to perform the functions of the rental venture.While sitting in inventory. nor would there be any municipal tax consequences.50/ft2/yr and are in moderate shortage. Subtracting the annual operating costs for maintaining this space as a warehouse (shown below). the space does have tangible value and should be considered as a significant benefit which will result from implementing this recommendation.027) x (0.$12.530/yr Administrative Costs = 2 hr/wk x 52 wk/yr x ($15.15/yr) Reclaimed Capital Earnings = $2.000 ft2 in size are in the range of $3. Operating Cost It is estimated that it would require an additional 10 hours/week of manpower (warehouse person. It is not necessary to insure other client’s property. If invested elsewhere in the company. D.284 + $5.46. shipping clerk.854/yr The warehousing space used to store out-of-date goods is essentially wasted space at the present time.750/yr.636/yr = $21. such as expanded production operations or as leasable space. the value of the out-of-date products can be viewed as “idle” capital. purging the out-of-date glassware will make the space available for other uses. Using a leasing value of $3. Washington.75/ft2/yr) = $33.00/hr + 35% fringe) = $2.743) x (0. however.114/yr. Although this space may be viewed as having no value (because it is owned by the company). According to statistics published by the Society of Industrial and Office Realtors19. In this light.636/yr NOTE: The above costs may not be as high if the space is leased for non-warehousing purposes.00/hr + 35% fringe) = $10. gross lease prices in your company’s geographical area for warehousing spaces in the range of 5.000 to 20. 124 . this capital would be worth (assuming a rate of return of 15%/yr): Reclaimed Capital Earnings = (Value of Out-of-Date Inventory) x (15%/yr) = (Raw Material Cost Savings + Energy Cost Savings) x (15%/yr) = ($13. Labor = 10 hr/week x 52 weeks/yr x ($15. the net earnings would be $33.C. etc. this space has a revenue producing potential of (9.106/yr Total Costs = $12.25-$4.000 ft2) x ($3. there would probably be a one-time facility renovation cost in that case.75/ft2/yr.15/yr) = ($19. 19 1996 Comparative Statistics of Industrial and Office Real Estate Markets.750/yr . Society of Industrial and Office Realtors.
if job rules and available personnel allow.4 years (5 months) * NOTE: The above payback calculation neglects the one-time SAVINGS of $19.640 / ($23.00/hr for 80 hours = $6400 Total labor = $9. An alternative scheme would be to use present personnel. 125 .027. labor = 2 inside people @ ($15.640 Simple Payback* = $9.00/hr + 35%) for 80 hours = $3240 2 outside hires @ $40.968/yr) = 0.Implementation Costs The cost to implement this recommendation include: 1) clean-up of old inventory 2) modification of your present inventory system to identify out-of-date goods 3) preparing the reclaimed space for rental purposes Cost to clear the area is estimated as using existing personnel and hiring outside help for two weeks.
000 parts at a time to the printing area. and the work force skilled. with the products moving through the factory. but rather they "grew" into it. they do not assign any value to wasted space. This is characterized by longer production runs. A common practice by plant management over the years has been to expand into all available space. or job shops. or non-value added operations. Low quantity producers. Most manufacturers did not design the layout you see today. since equipment changeover is time consuming. The other type of small production uses a cell layout. the product can be produced in batches. Equipment is somewhat specialized.Floor Layout Introduction Opportunities in modifying floor layout involve saving time. 127 . The facility is laid out in departments. inventory or labor. Floor layouts will vary depending on the number of different products made. lathes are in one area. or changing sizes. Workstations are arranged to manufacture a "family" of products simply by adding or eliminating steps. Equipment is designed so that similar products can be made (or assembled) on the same machinery without significant modification to the machines. While this layout allows for flexibility. and the demand is predictable. and minimizes handling by reducing lead time. space. the disadvantage is much moving and handling. particularly if it does not have a direct cost. The product is routed through departments in the order of the process required. Typically. One type of small quantity layout is process oriented. This economizes on the amount of inprocess inventory. High quantity production is generally set up in flow line layout. and by the quantity produced. paint booths in another. where equipment is consolidated by type. Many factories will be a mixture of these three types of layouts. even constructing or leasing new buildings rather than maximizing the existing floor layout. The equipment is general purpose. This is accomplished by eliminating or reducing wasted motion. and orders are usually made to replenish inventory. The final products or assemblies are often made to order. usually on conveyors. produce small quantities of specialized and customized products. This strategy is used when there is a lot of variety in the product and/or the demand is unpredictable. and the workstations and workers located next to the line. frequently repeated. One example of modifying a floor layout to reduce in-process inventory involved a manufacturer of plastic parts that moved batches of 10. If the product varieties are few.
000 to one. finished goods) • Unnecessary motion • Excessive transportation within the plant • Duplication (two conveyors where one would do) Related ARs • MODIFY EQUIPMENT LAYOUT TO REDUCE MOTION OR TRANSPORTATION • RELOCATE DEPARTMENT (REPAIR SHOP. ELECTRICITY) TO REDUCE TIME SPENT MOVING PRODUCT OR TOOLS • CLEAR EQUIPMENT GRAVEYARD TO MAKE USEFUL SPACE • CONSOLIDATE PRODUCTION AREA TO CREATE WAREHOUSE SPACE 128 .Printing took only one minute. in-process. This layout modification also eliminated the expense of movement by forklift. SHIPPING) TO REDUCE TRANSPORTATION TIME • VERTICALLY WAREHOUSE THE FINISHED PRODUCT (OR USE ROBOTICS) TO REDUCE TRANSPORTATION AND/OR MAXIMIZE FLOOR SPACE • INSTALL DISTRIBUTION SYSTEM TO MOVE RAW MATERIALS (OR WASTE) TO REDUCE TIME ASSOCIATED WITH INDIVIDUAL PICK-UP AREAS • DISTRIBUTE UTILITIES (AIR. Questions to Ask • Do you rent. reducing the lead time to less than 5 to one. a manufacturing lead time of 10. WATER. lease or own the facility (or another)? (cost $/ft2 /yr) • Do you have any plans for expansion? • How do you account for the cost of space? (cost $/ft2 /yr) • How many different products do you make? • What is the lead time of the product/process? Indicators / Symptoms • Excess Inventory (raw material. It was possible to move the extruder next to the printer.
23 Clear and Rent an Existing Warehouse Assessment Recommendation Summary Estimated Cost Savings = $125. Washington. by management.50/ft2/yr and are in moderate shortage. Presently it is insured and annual taxes are paid on the original assessed value of the building. There is ample room in other warehouses to store the machinery and materials that are still valuable to the company.75/ft2/yr) = $125..400 ft2 of usable space and a private entrance. gross lease prices in your company’s geographical area for warehousing spaces in the range of 20. p.400 ft2) x ($4.400/yr. this space has a revenue producing potential of (26. These are costs that your company is absorbing and little to no benefits are received. D. Society of Industrial and Office Realtors.00-$5. 129 . Using a leasing value of $4.000 to 60. A large portion of the machinery in the warehouse is no longer worth repairing and is considered unsalvageable.000 ft2 in size are in the range of $4. Recommended Action Clear warehouse #3 and rent it to an outside organization. Estimated Implementation Cost = $38. The warehouse has approximately 26.C. separating all machinery or materials that are salvageable and moving them to other warehouses. It is believed.75/ft2/yr. 20 1996 Comparative Statistics of Industrial and Office Real Estate Markets.400/yr.Assessment Recommendation No. It is important that a large portion of what is presently in the warehouse be permanently disposed of in order to avoid this problem from occurring in another place. that more than three-quarters of the objects that are presently being stored in the warehouse are of no future use. Anticipated Benefits According to statistics published by the Society of Industrial and Office Realtors20.3 years (4 months) Existing Practice and Observation Warehouse #3 is presently being used for the storage of out-of-date machinery and unusable material. The rest of the equipment and materials that have no value can be hauled to the dump.46.000 Simple Payback Period = 0.
The simple payback period can be calculated with the following equation: Payback Period = (Implementation Cost) / ACS = ($38.) Payback Period = 0.50 per yd3 of rubbish while the dump charge will be $30 per yd3 at the trash facility. resulting in a total removal cost of $38. The rubbish will have to be loaded. Assuming the worst price to allow for improvements. MA.000.S. Means Construction Company. 130 . the 5 tons of scrap will return: (5 tons) x (2000 lb/ton) x [($2.)] = $250 The total implementation costs will be $38.50 /100 lb. The savings for salvaged scrap metal is the amount of money that can be collected from the salvage of the machinery in the warehouse. Kingston.50 per yd3 of rubbish21. The loading and hauling will cost $46.50 to $4.400 /yr. R.250. The price that is paid for the metal varies from $2. hauled.Implementation Implementation requires the removal of the unusable materials and salvage of the scrap machines. It is estimated that 500 yd3 of rubbish will need to be removed. and dumped at the nearest trash site. This will result in a total disposal cost of $76.000) / ($125.3 years (4 months) 21Means Repair and Remodeling Cost Data 15th Annual Edition.00 per one hundred pounds and mainly depends on the condition and type of metal.
131 .038 Simple Payback Period = less than one month Existing Practice and Observation Part of the existing floor layout is shown in Figure 1. 24 Re-arrange Equipment Layout to Reduce Labor Costs Assessment Recommendation Summary Estimated Cost Savings = $135. two operators are required. A full product changeover. takes approximately 6 hours (on average).Assessment Recommendation No. spending well over half of their time waiting for something to do. one operator is used for each type of packing machine and there are four production shifts per week. . Both manual and automated packing machines are used to package finished products (cups)..000/yr Estimated Implementation Cost = $5. This will allow one operator (instead of two) to monitor both machines.). including the process set-up. The automated machines can package cups from two production lines at once and are used where the same product is manufactured on two adjacent lines. Since these machines are presently located at least 50 feet apart. Presently. Recommended Action Re-arrange the production equipment as shown in Figure 2. where the ordered volume of cups doesn’t merit the use of two simultaneous production lines. placing the two automatic packaging machines side by side. The manual machines are only capable of packaging product from one line at a time and are used on the lower volume cup lines. According to management. The operators on the two automatic packing machines were observed to be underutilized. This will require four complete production line changeovers and the movement and setup of one automatic packing machine and two manual packers. aside from the packing machines the only difference between production lines for different products are the molds and the process set-up (timing. etc.
>50% idle time Finished Goods Molds Molds Unscrambler Unscrambler Q.C. Manual Packer Manual Packer Finished Goods Finished Goods Figure 2: Proposed Process Flow / Floor Layout 132 . Q.C. Automated Packer Q.C. Manual Packer Manual Packer Finished Goods Finished Goods Molds Molds Unscrambler Unscrambler Q.C. Q.C.Molds Molds Unscrambler Unscrambler Q.C. Finished Goods Molds Molds Unscrambler Unscrambler Q. >50% idle time Finished Goods Figure 1: Existing Process Flow / Floor Layout Molds Molds Unscrambler Unscrambler Q. Automated Packer Q. One Worker Can Manage Both Machines Finished Goods Molds Molds Unscrambler Unscrambler Q.C. Automated Packer Q.C.C. Automated Packer Q.C.C.C.
75/hr $326 Total Implementation Cost $5.038 / ($135.350 Trades Electrician 16 hr. 133 .75/hr incl. fringe) = $1.000/yr Implementation Implementation of this recommendation will require: In-house Labor 4 technicians/changeover (@ $19. 15th Annual Edition.869 Plant Foreman (5 days) (@ $33.00/hr $512 Hydraulic Crane (25 ton) @ $541/day $541 Equipment Operator (Crane) @ $40.47/hr) x (6 hr/chg.35 fringe) Cost Savings = $135.000/yr) = less than one month Note: Labor values taken from Means Repair & Remodeling Cost Data. fringe) 6 hours/changeover 4 changeovers are required (4) x ($19.50/hr $440 Moving Equipment / Operators (1 day) Laborers 2 @ $32. @ $27.47/hr incl.038 Simple Payback = $5.000/yr/operator) x (1.) x (4 chg.Anticipated Savings The equipment re-arrangement will reduce the labor requirements for the packaging operation by one person per shift for 4 shifts: Cost Savings = (1 operator/shift) x (4 shifts) x ($25.) = $1.
790/yr Estimated Implementation Cost = $6343 Simple Payback Period = 2 months Existing Practice and Observation The process of manufacturing cereal feeds is divided into two lines each running in the same direction in the facility. mixed. These bins are then moved by forklift truck to the beginning of the second line. extruded. where other ingredients such as minerals and vitamins are added. packaged and moved to shipping. The product is then pelletized. milled. pelletizers drying cooling packaging and shipping move product by forklift mill extruder weigh hoppers silo silos Figure 1: Existing Process Flow / Floor Layout 134 . dried. ground.Assessment Recommendation No. cooked with steam and starches. the grains are weighed.056/yr Estimated Additional Income = $44. In the first line. and loaded into bins. 25 Re-arrange Equipment Layout to Reduce Handling Costs Assessment Recommendation Summary Estimated Cost Savings = $4.
00/hr) x (1. packaging and shipping pelletizers cooling drying mill extruder weigh hoppers silo silos Figure 2: Proposed Process Flow / Floor Layout Anticipated Savings The product is moved 10 times each day (one shift). little or no inconvenience will be caused by moving the location of the shipping operations. Since there are loading doors on both ends of the facility. x 10 times/day x 250 days/yr = 208 hrs/yr Labor Saved = (208 hrs/yr) x ($15.30 fringe) = $4. Since your company has a planned shutdown for one week. eliminating the need to move the product by fork-lift.896/yr 135 .902/yr @ 10% profit = $44. it is recommended that this move be made during that time.Recommended Action Re-arrange the production equipment into a continuous line and install a conveyor system to deliver in-process materials from the weigh hoppers to the dryer. Re-arrangement of the equipment will save: 5 min. Each movement of the product takes 5 minutes. x 1 hr/60 min.056/yr Increased Production =(7200 tons/yr) / (2000 hrs/yr) x 208 hrs/yr = 749 tons/yr Increased Sales = 749 tons/yr x $598/ton = $447.790/yr Total = $48.
60/hr $1.50/hr fringe) $1.488 Plant Foreman @ ($25/hr + $7. 15th Annual Edition.623 Equipment Operator (Crane) @ $40.45 yrs (approx.65/hr $1.75/hr $978 Total Implementation Cost $70.740 Simple Payback = $70.30/hr $453 Laborers (40 hr) Skilled 2 @ $24.50/hr $440 Plumber 16 hr. @ $28. 136 .740 / $48. 17 months) Note: Labor values taken from Means Repair & Remodeling Cost Data.000 Trades Electrician 16 hr. @ $27.896/yr = 1.972 Helpers 2 @ 18.00/hr $1.00/yd 3 = $600 Moving Equipment / Operators Laborers 2 @ $32.Implementation Implementation of this recommendation will require : Conveyor System (installed) $60.00/yd 3 = $350 Rubbish 20 yd3 @ $30.300 Trash Removal Construction 10 yd3 @ $35.536 Hydraulic Crane (25 ton) @ $541/day $1.
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